MSCI to Decide on Proposing Israel for Europe Basket by June

MSCI Inc. (MSCI) will decide no later than June whether to propose including Israel in its European index after receiving “mixed feedback” from investors.

“We have received mixed feedback from investors” if they see Israel as part of their European investment basket, Sebastien Lieblich, global head of index management at MSCI, said today in a phone interview with Bloomberg from Geneva.

MSCI, the New York-based provider of indexes and portfolio analytics, said in June it is considering including Israeli stocks in its European index and is seeking feedback from investors on the change. The company reclassified Israel as a developed market from emerging-market status in May 2010 and based on “participant feedback” didn’t include the MSCI Israel Index in the MSCI Europe Index, it said in a statement on June 20.

Instead, it created the MSCI Europe and Middle East Index as a new regional developed-market index, part of the MSCI World Index. The shift reduced Israel’s weighting to about 0.85 percent on the new index from 2.5 percent on the Emerging Markets index. “Funds tracking the European index did not have an incentive to switch to the new index,” the Bank of Israel said in March.

The Tel-Aviv Stock Exchange’s Chief Executive Officer Ester Levanon said in May the bourse is seeking to move to the MSCI Europe index to boost trading volumes.

The shift was one of the factors contributing to a decline in trading volumes in Tel Aviv, the Bank of Israel said on March 12. Trading has dropped 44 percent since the beginning of 2010 to the end 2012 compared with an 18 percent global average decline, the central bank said. In the second half of 2012 volumes hit a six-year low.

If the feedback shows that investors see Israel as part of their European basket, then MSCI would propose to move Israel from the MSCI Europe and Middle East Index into the MSCI Europe index, Lieblich said.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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