Brokers in Tel Aviv favor a proposal to align the stock exchange’s trading days with markets abroad, a plan that may lure more funds and pave the way for inclusion in MSCI Inc.’s Europe Index, a bourse board member said.
Members of the exchange, including banks and brokers, need to present their views on the proposed switch to a Monday-to-Friday trading week within a month, according to Julien Assous, chief executive officer of IBI-Israel Brokerage & Investments Ltd. There is no target date yet for the change, said Assous, who is also the chairman of the TASE Brokers Association.
“The chances of the switch happening are good,” he said today in a phone interview from Tel Aviv. Assous said earlier this week the proposal is part of a larger campaign to be included in the Europe Index. “There is no strong objection to the move from any party,” he said.
Israel’s only stock exchange is examining moving from the current Sunday-to-Thursday week to align with other markets, and the board of directors supports the proposed change, it said Aug. 25. Yossi Beinart, who took over as the bourse’s chief executive officer this year, is seeking to draw foreign investors back to the exchange.
Emerging market investors exited the local bourse as the nation joined MSCI’s developed index, forcing Israeli companies to compete with those from the U.S., Europe and Japan for fund managers’ attention. The average daily trading volume in Tel Aviv has dropped by about a third since 2010, and plunged to a five-year low of 955 million shekels ($268 million) in April, according to data compiled by Bloomberg.
Being added to MSCI’s Europe index would be a big boost to trading volumes on the TASE, said Jacob de Tusch-Lec, who helps oversee about $23 billion in equities at London-based Artemis Investment Management LLP.
“Part of your investor base would be much more sticky, because they have to be invested in Israel,” he said by phone yesterday. “Right now, the Israeli market is what I would call orphaned.”
MSCI, whose gauges are tracked by investors managing about $9 trillion, rejected Israel’s bid to be in its Europe Index in June 2013. Then-TASE CEO Ester Levanon said at the time inclusion would attract as much as $2 billion of foreign capital.
“We must join the family of global exchanges which nearly all trade Monday to Friday,” Barak Soreni, CEO of Tel Aviv-based Psagot Securities Ltd., a subsidiary of Psagot Investment House Ltd., said by phone. “Foreign investors are used to working on these days and this will avoid the creation of unnecessary arbitrages.”
Brokers in Israel will be able to handle the trading day shift, and it shouldn’t be a huge obstacle for banks either because their trading rooms are active on Fridays already, Assous said.
Ofra Preuss, a spokeswoman for Bank Hapoalim Ltd., and Lee Newmann, a spokesman for Bank Leumi Le-Israel Ltd., said by phone today their banks are studying the proposal.
The TA-25 Index declined 0.3 percent to 1,404.41 at the close in Tel Aviv, paring its gain this year to 5.6 percent.
Four companies have joined the exchange in 2014, compared with a record 56 in 2007. To boost volumes and spur listings, the exchange is amending rules to allow trading of local companies listed abroad in a bid to attract smaller businesses, Beinart said in an interview May 12.
The exchange may also create a gauge that will include Israeli technology stocks listed at home and abroad, while a government panel has recommended tax breaks and cutting red tape to lure high-tech startups.
“We largely are in favor of” the trading day change, Soreni said. “But it’s not the perfect solution to the trading volume problems of the local bourse. This is one important step, but much more needs to be done.”