January 30, 2011 / 11:31 AM / 8 years ago

Israel stocks fall on anti-govt protests in Egypt

* Blue-chip index down 2.5 percent, largest drop since May

* Firms that import gas from Egypt hit hardest

* Local oil and gas exploration companies benefit

By Steven Scheer

JERUSALEM, Jan 30 (Reuters) - Israeli stocks fell on Sunday, and were set for their biggest one-day fall since May, as protests in Egypt and across the Middle East raised fears foreigners will reduce their investments in Israel.

The index of 25 blue-chip stocks on the Tel Aviv Stock Exchange .TA25 was down 2.5 percent at midday, with the broader TA-100 index .TA100 2.7 percent lower.

“We are not seeing any panic selling but everyone is keeping a close eye on the situation,” said a trader at a large Israeli brokerage, adding local investors had bought on the dip.

Traders said the decline in Tel Aviv mirrored losses on Friday in New York, when U.S. shares suffered their biggest one-day loss in nearly six months. [ID:nN28196807]

“Even if Israel manages to stay out of trouble, it is reasonable that investors around the world would not feel comfortable investing here and that is before weighing the economic implications of higher defence spending, if needed, especially if the uncertainty spreads to the West Bank,” said Amir Kahanovich, an economist at the Clal Finance brokerage.

Most Israeli companies have no exposure to Egpyt. Those that do have seen their shares slide, led by a 14 percent drop in Ampal American Israel Corp AMPL.TA.

Ampal owns 12.5 percent of East Mediterranean Gas (EMG), a joint Egyptian-Israeli company that supplies an estimated 2.1 billion cubic meters of natural gas annually to Israel.

EMG last month signed agreements worth as much as $10 billion to sell gas to five Israeli companies, including Oil Refineries (ORL.TA) whose shares were down 4.4 percent.

Israel Chemicals (ICL) (ICL.TA), which also signed a deal to buy gas from EMG for one of its power plants, was down 3 percent. Israel Corp (ILCO.TA), the parent of both ICL and Oil Refineries, was 3.8 percent lower.

As part of the deal, Israel Corp has an option in coming weeks to buy more gas from EMG. Analysts said Israeli companies will turn to firms developing gas at the Tamar site off Israel’s coast.

“The recent events cast doubt that this option will be exercised and raise the chances for Tamar to supply the gas,” said Adi Stern, director of energy and telecoms investments at the Tamir Fishman brokerage.

Stern expected higher natural gas prices in the short run, adding Egypt has a clear economic interest in providing gas to Israel in the long term.

Israeli partners in Tamar were benefiting, with Delek Drilling (DEDRp.TA) shares up 0.2 percent, Avner Oil and Gas Exploration AVNRp.TA down just 0.2 percent, and Isramco (ISRAp.TA) rising 2.1 percent.

Israeli government bond prices <0#ILGOI=TA> were also down. (Editing by Dan Lalor)

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