MSCI Inc. is considering including Israeli stocks in its European index and is seeking feedback from investors on the change, the New York-based index provider said.
MSCI reclassified Israel as a developed market from emerging-market status in 2010 and based on “participant feedback” didn’t include the MSCI Israel Index in the MSCI Europe Index, it said in a statement yesterday. Instead, it created the MSCI Europe + Middle East Index as a new regional developed-market index.
“We are asking which geographical area Israel should be incorporated into,” Remy Briand, global head of index research at MSCI, said on a conference call today. "It’s an open question but at this stage there is no proposal for change."
Changes at MSCI could lead to the nation’s equities luring more of the investor assets that follow the provider’s gauges. 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 addition of Israel to any significantly tracked MSCI index should be a market positive,” Saar Golan, the head of equities trading at Clal Finance Batucha Brokerage Ltd., said in an e-mail today. “Israel would be a minor component, but it would mean an inflow of funds into MSCI Israel stocks.”
The benchmark TA-25 Index has risen 26 percent since June 2009 when MSCI announced the upgrade to developed-market status. That compares with a 61 percent rally for the Nasdaq Composite Index. The value of the average daily trading volume on the TA-25 Index has dropped to 631 million shekels ($162.6 Million) this year from 908 million shekels in 2011 and 1.1 billion shekels in 2010, according to the exchange.
“There is a great chance for such a decision,” Levanon said in a telephone interview today. “After two years since Israel’s upgrade to the status of developed market, I am quite sure all the global investors realize that the Israeli economy and companies are very similar to the good European economies and companies, and that is why Israel should be considered part of the MSCI Europe index.”