Israeli Bourse Caps New Entrant Index Weight to Avoid Distortion

Israel’s only stock exchange will limit the weight of new entrants to its major indexes as it bids to attract new companies.

The Tel Aviv Stock Exchange will cap the maximum weight of companies joining the TA-25, TA-75 and TA-100 indexes at 4 percent, according to an e-mailed statement from the bourse. The decision follows the dual-listing of Mylan NV last month, the largest ever addition to the exchange, which threatened to skew the main index heavily toward pharmaceutical shares.

"We acted swiftly to correct distortions in favor of the market, without closing the door to foreign companies that want to trade on the stock exchange," TASE chief executive officer Yossi Beinart said in the statement.

Beinart has been leading a drive by the Israeli bourse to boost flagging trading volumes and entice new listings. Some of those measures are working. Even as the exchange heads toward its worst year for new offerings since 2012, several U.S.-traded biotech companies, including MannKind Corp. and BioTime Inc., have listed in Tel Aviv in the past three months.

"The bourse intends to complete the reform of the indexes and change the current method of calculating them so that they will be more scattered and less dependent on a single share," said Yaniv Pagot, the head of strategy at Ayalon Group Ltd. "It makes no sense to introduce a share with a weight of 10 percent and then require the holders of the index to sell."

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