Summary:
The value of the public's portfolio of financial assets rose by 12.3 percent in nominal terms during 2003 and reached a total of NIS 1,385.9 billion following a moderate increase of 1.8 percent in 2002. The increase in the value of the portfolio in 2003 encompassed all local assets, while the foreign currency asset component contracted slightly. The development of the asset portfolio in the course of the year was affected by two main factors-the decrease in the yield/risk ratio expected from investment in local assets, and by the capital market taxation reform.
The decrease in the yield/risk ratio on local assets from March onwards was reflected by a rise in the prices of all local financial assets (shares, bonds and Treasury bills), as compared to a decrease in the prices of foreign currency assets. The reduction in the Bank of Israel's interest rate resulting from the decline in inflation expectations supported the upturn in the prices of local assets. The reform in capital market taxation, which went into effect in 2003, was one of the reasons for the public's move from non-tradable assets (deposits at the banks and saving schemes) to tradable assets (Treasury bills and bonds).
A notable increase was recorded in the local and foreign share component of the portfolio in 2003, reflecting the rise in share prices. In the portfolio exclusive of the share component, the proportion of unindexed assets rose, while the proportion of CPI-indexed assets and foreign currency assets fell. The distribution of the asset portfolio by investment term remained largely unchanged. Among all terms, the proportion of assets held via the banks fell (the decrease encompassed all indexation types), while the proportion of bonds and Treasury bills increased.