Never Mind Geography, Israel Eyes Membership of European Indexes
Never Mind Geography, Israel Eyes Membership of European Indexes
(Bloomberg) -- It may be nestled between Asia and Africa, but Israel is asking global investors to treat it as a European market.
Six years after the nation’s bid to join the continent’s benchmarks failed, regulators are again targeting membership of gauges such as the MSCI Europe Index for stocks and FTSE Euro Corporate Bond Index. They’re reaching out to providers to understand what needs to be done to remove any obstacles, said Anat Guetta, the chair of the Israel Securities Authority.
“We plan to commence talks with relevant index providers soon,” Guetta said in an interview in Tel Aviv. Once one provider decides to include some securities, “the outcome will drive other index providers to consider doing so as well,” she said.
At stake is Israel’s bid to return fund flows to a market that has seen trading volumes dwindle in the past decade. If it proves successful, its $190 billion stock market could gain inflows of $2 billion from passive funds, according to regulators.
Officials also argue that economic metrics put Israel in the class of European nations rather than those in the Middle East. Israel’s GDP per capita was $41,614 in 2018, about the same as France, according to World Bank figures.
Painful Promotion
Israeli trading volumes have declined since 2010, when MSCI Inc. reclassified Israel from an “emerging” to a “developed” market. The move triggered outflows of foreign capital as investors who use the indexes to compose their portfolios adjusted their holdings.
Since then, regulators have been taking steps to lure back global investors. Guetta, who was appointed two years ago, has advanced proposals to allow companies the option of filing reports in English and open a secondary trading platform.
Since the MSCI rejected Israel’s bid to join its Europe Index in 2013, the market has evolved. The Tel Aviv Stock Exchange has become a for-profit, publicly-traded company. Foreign exchange-traded funds are allowed to dual-list in Tel Aviv.
In September, FTSE Russell said it would add Israel to its benchmark World Government Bond Index.
More on FTSE Russell inclusion: Billions Could Be Headed for Israeli Debt After Bond Index Entry
Israel’s campaign for European membership won’t be as easy, according to Steven Schoenfeld, the chief investment officer of BlueStar Indexes.
“It’s going to be difficult for Israel’s financial community -- whether it’s the regulators or the exchange or asset managers -- to convince the index providers to change Israel’s geography,” Schoenfeld said.
To contact the reporters on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net;Ivan Levingston in Tel Aviv at ilevingston@bloomberg.net
To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net, Srinivasan Sivabalan, Alex Nicholson
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