The Tel Aviv Stock Exchange’s decision to extend trading hours will do little to boost trading volumes from a six-year low, according to Artemis Investment Management LLP.
“The Israeli stock exchange is, not by its own fault, in a tough spot,” Jacob de Tusch-Lec, a London-based money manager at Artemis, which oversees $20 billion including Israeli shares, said by phone yesterday. “What would really help is if Israel got into an index.” The extended hours “won’t help with that,” he said.
Trading will be stretched to 5:30 p.m., the TASE, as the exchange is known, said yesterday in an e-mailed statement. The move is the latest step the Tel Aviv bourse has taken as it seeks to lure international investors after MSCI Inc.’s 2010 reclassification of the market as developed reduced flows. The exchange is also in talks with Deutsche Boerse AG to add a futures contract on the benchmark TA-25 index, and has sought to diversify listings dominated by energy and financial stocks.
The Tel Aviv Traded Volume Index fell 17 percent in 2012 to the lowest level since 2006. The Bloomberg Israel-US Equity Index of the largest Israeli companies traded in New York added 2.2 percent in the month.
Equity trading will be prolonged to 5:30 p.m. from 4:30 p.m. Monday to Thursday and will be cut to 2:30 p.m. on Sunday, the bourse said. Volumes increased more than 30 percent on days the trading hours coincided more with European and U.S. markets, the TASE said, citing an internal analysis.
The changes, which are set to take place in the first half of April, are aimed at increasing trading volume and arbitrage trading as well as improving the liquidity of dual-listed companies, the exchange said.
“If your benchmark is emerging markets, why would you buy Israeli equities? If you’re a European fund manager, it’s not a part of your benchmark either,” de Tusch-Lec said. “That’s the real issue, which makes the whole operating hours thing irrelevant.”
Following Israel’s upgrade to a developed market, which took effect in May 2010, investors tracking MSCI gauges had to rebalance their portfolios as Israel was moved from emerging-market groups to the MSCI Europe and Middle East Index, part of the MSCI World Index. The change led to a net outflow of $795 million from Tel Aviv shares by the end of 2010, compared with inflows of $1.7 billion in 2009, central bank data showed.
After Israel was removed from the emerging-market measure, “the appetite for local stocks from international holders decreased dramatically,” Sagie Poznerson, head of trading at Leader Capital Markets Ltd., said in a telephone interview yesterday from Tel Aviv.
TASE’s lengthened hours will increase trading overlap with Europe and extend to the start of the trading day in the U.S. While dual-listed stocks such as Teva Pharmaceutical Industries Ltd. may seem volume benefits due to arbitrage trading, “that in itself won’t increase the attention of international institutions,” Poznerson said.
The TA-25 Index gained 3.7 percent to 1221.47 in February. A longer trading day may help Israel’s case to be included in the MSCI Europe Index, Zach Herzog, head of equity sales and trading at Psagot Investment House Ltd. in Tel Aviv, said by phone yesterday.
“It is a positive step,” Herzog said. “The question is whether it’s successful in attracting more attention from global investors, not just the arbitrage players.”
Allot Communications Ltd. slid 4.2 percent to $13.73, the most since Jan. 8, while the shares traded in Tel Aviv lost 3 percent to 53.2 shekels, or $14.33. The Hod Hasharon, Israel-based maker of products that track wireless traffic was the worst performer on the Bloomberg Israel-US gauge.
Procera Networks Inc., which also develops communication equipment, plunged 30 percent as its projected 2013 revenue growth of 25 percent to 30 percent came below the median estimate of seven analysts surveyed by Bloomberg.
“It’s not unusual for everyone in a category to sell off together when one company reports,” Alex Henderson, an analyst at Needham & Co. who rates both companies buy, said by phone yesterday in New York. “They all move in tandem.”
Caesarstone Sdot Yam Ltd. added 1.5 percent to $23.25, its highest price since Feb. 19. The Israeli producer of quartz-based countertops has added 45 percent this year, making it the best performer on the Bloomberg Israel-US index in 2013.