Africa-Israel chairman Lev Levayev said that his investments in the United States were the reason for the company's colossal $400 million second quarter loss that sank shares by 25 percent on Sunday. Africa-Israel shares fell another two percent Monday morning.
“Our main mistake was investing in the U.S.,” the Russian-born diamond tycoon stated. "I like to concentrate on the future. What has happened has happened. I haven't stolen or deceived anyone and have done my best and many people have made money from Africa-Israel's shares.”
Despite the loss, the Israeli economy and financial system remains in relatively good shape, economists said. But in the current economic climate, emotions overcame reason as Africa Israel'a financial report struck fear among investors, who feared fallout from the company's debt troubles and a domino disaster similar to the crisis that hit the U.S. after Bernie Madoff was charged with allegedly bilking investors for $50 billion.
Africa-Israel’s troubles caused a one-day slump in all stock indices and even in companies that have been reporting handsome profits. Banks that have outstanding loans with Africa-Israel assured investors that their institutions, and the financial system in general, can withstand the shock.
Bank of Israel Governor Stanley Fischer recently stated that strict controls on Israeli banks helped save Israel from the disaster that hit the U.S. Although unemployment remains high, second quarter figures for the economy show that the recession appears to have ended.