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Israeli stock market falls, shekel weakens after Knesset passes first judicial overhaul bill

Israeli and international businesses have raised concerns that the judicial reform will undermine democracy and weaken an independent judiciary

Illustrative - A stock market ticker screen in the lobby of the Tel Aviv Stock Exchange, in the center of Tel Aviv, March 15, 2020. (Photo: Nati Shohat/Flash90)

Israeli stocks on the Tel Aviv Stock Exchange fell after the Israeli parliament passed the first part of the government’s contentious judicial reform plan.

In addition, the normally robust Israeli shekel weakened significantly against major currencies, such as the U.S. dollar and the Euro.

IBI Investment House, Ltd. Chief Economist Rafi Gozlan said Israeli businesses had hoped a compromise would be reached on the judicial overhaul controversy. 

“There was hope in Israeli markets, until the last moment, that some kind of a compromise on the planned judicial changes could be reached,” Gozlan told the Times of Israel. 

He said the passing of the controversial bill erodes market optimism about the future. 

“If, ahead of the vote, we saw market optimism for more agreement, following the final approval of the bill, the local market is now pricing in an increase in Israel’s risk premium and the damage it may cause to the economy and tech investments.”

Israeli and international businesses have raised concerns the judicial reforms will undermine democracy and weaken an independent judiciary, which serves as checks and balances in the absence of a formal constitution. This would make Israeli and international investors nervous and think twice before investing in the Israeli economy. 

Gozlan warned that Israeli tech companies could potentially struggle to raise funds for their continued businesses. 

“A higher risk premium means that it will be more difficult for Israeli companies, in particular in tech, to raise money as investors will be more cautious to invest in the local industry.”

Close to 70% of Israeli startup companies are reportedly in the process of relocating and moving funds abroad due to the uncertainty caused by the government’s judicial overhaul plan. 

In April, Moody’s, one of the world’s leading risk assessment agencies, downgraded the Jewish state’s economic outlook from positive to stable, citing “deterioration of Israel’s governance.” 

The All Israel News Staff is a team of journalists in Israel.

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