Israeli Prime Minister Benjamin Netanyahu has invoked Wall Street investment banks Goldman Sachs Group Inc. and JPMorgan Chase & Co. to rebuff warnings of a market backlash against his government’s plans to reshape the judiciary.
(Bloomberg) —
Israeli Prime Minister Benjamin Netanyahu has invoked Wall Street investment banks Goldman Sachs Group Inc. and JPMorgan Chase & Co. to rebuff warnings of a market backlash against his government’s plans to reshape the judiciary.
“They say that the judicial reform will keep investors away,” Netanyahu said in a video posted Sunday evening on Twitter. “But two of the biggest and most influential investment banks, JPMorgan and Goldman Sachs, say the exact opposite.”
The prime minister retweeted a screen grab of a JPMorgan trading desk note that called protests against his proposed judicial changes “largely noise” and said they didn’t “change the fundamental bullish picture for ILS rates,” a reference to shekel-denominated bonds.
Goldman Sachs economist Tadas Gedminas had written in a Jan. 26 report that any “negative risk scenarios” from the proposed changes, such as reduced foreign investment, “would take years to materialize.” The report also noted that the turmoil could create a drag on markets, however.
“Market participants expressed concerns over the fallout from domestic political uncertainty that is likely to weigh on sentiment and could leave the currency exposed,”Gedminas wrote. “In particular, controversial judicial reform has resulted in strikes in major urban areas and raised concerns from business leaders.”
Gedminas, and spokespeople for JPMorgan and Goldman Sachs, didn’t provide further comment on the reports when contacted by Bloomberg on Monday.
Proponents of Netanyahu’s plan say it’s needed to restore balance between the three branches of government, arguing that the supreme court has become overly activist. Critics say it gives the executive and legislative branches excessive power, and poses a danger to Israel’s democracy and its economy.
Tens of thousands of Israelis have protested the proposals, while some prominent economists and tech leaders have warned that they could damage the nation’s credit rating and the ability of Israeli companies to raise capital.
Market Moves
The shekel slid by as much 1.7% on Monday and was trading 1% weaker at 3.4700 per dollar as of 4:55 p.m. on Monday. That was the biggest decline among major world currencies tracked by Bloomberg.
The cost to insure Israeli debt against default for five years using credit default swaps, a measure of investor perceptions of risk, rose 7 basis points to 53.5, the biggest increase since June to the highest in almost four years.
The combination of the proposed legal measures and rising tensions with Palestinians recently “was enough to shake investor sentiment,” BNP Paribas SA strategist Jerome Leibovici wrote in a note to clients on Monday.
“The reform has broad-based support from the government but following the recent slew of criticism and protests, we think it is likely that the Netanyahu-led government will moderate several aspects,” Leibovici said. “This will delay the reform’s package but will be received positively by the market.”
(Updates with more comment from Goldman report, CDS move.)
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