Tel Aviv Exchange Targets Overseas Technology Equities

The Tel Aviv Stock Exchange is trying to give local investors a taste of the rally in technology stocks that they missed.

The TASE, as the exchange is known, said last week that it’s looking to create an index that will include technology stocks traded locally and overseas. The Bloomberg Israel-US Equity Index of largest Israeli stocks traded in New York has gained 27 percent in the past year, nearly three times the advance of the benchmark TA-25 Index. Check Point Software Technologies Ltd. reported earnings on Jan. 28 that beat estimates, driving shares to the highest in 12 years.

The bourse is looking to lure more investors as volumes plunged 44 percent after it was designated a developed market. While Israel has more active startups per capita than any country, the TA-25 Index has only one tech stock after Mellanox Technologies Ltd. canceled its Tel Aviv listing last year. The value of Israel’s 10 largest technology companies listed in New York is almost four times that of the top 10 in Tel Aviv, according to data compiled by Bloomberg.

“This will attract more capital to Israeli equities,” Steven Schoenfeld, the New York-based founder of BlueStar Global Investors LLC, a financial research company focused on Israel, said by phone on Jan. 30. “Israel has lost companies. Check Point never listed in Israel, Mellanox delisted and left.”

Israel won the approval of the world’s arbiter for global stock markets three years ago, when MSCI Inc. promoted the country to a developed nation. The upgrade sparked outflows from the Tel Aviv bourse as emerging-market investors shed Israeli assets and the country was forced to compete with the U.S., Europe and Japan for fund managers’ attention.

‘Easier to Invest’

“We want to make it easier to invest in Israeli high-tech,” Hani Shitrit Bach, senior vice president at the bourse, said in a Jan. 29 interview at her Tel Aviv office. “An international index will enable investment in the technology sector and not only in a specific company.” The gauge will be a good base to create exchange-traded funds, she said.

The bourse is seeking to attract additional high-tech listings to better reflect the economic impact of technology companies, which account for about 80 percent of exports. While 58 technology companies are listed on the TASE, with a market capitalization of $6.8 billion for the 10 largest, the Nasdaq Stock Exchange and New York Stock Exchange have 55 Israeli tech stocks with the top 10 valued at $21.9 billion.

A committee to encourage high-tech startups to list in Tel Aviv, headed by Shitrit Bach, submitted proposals to the Israel Securities Authority last month.

Surpassing China

Initial public offerings have dried up in Tel Aviv. In June, Kadimastem Ltd., a developer of stem cell therapies, became the first company to list on the bourse since the end of 2011. Yet in New York, Israeli companies sold shares last year at the fastest pace since 2006, beating the number of offerings from China. Ltd., the Tel Aviv-based maker of online tools to create websites, raised $127 million on Nov. 5 in the nation’s largest initial public offering in more than six years.

The new index would include Israel-related companies not listed in Tel Aviv, such as security company Check Point and billing software-maker Amdocs Ltd., Shitrit Bach said.

Check Point, the Tel Aviv-based maker of network security gear, gained 1.1 percent last week after the company said its 2013 fourth quarter earnings rose to 98 cents a share, surpassing the 95 cent average of 27 analyst estimates compiled by Bloomberg. The stock reached the highest level since May 2001 on Jan. 30.

‘Dynamic Space’

The Bloomberg Israel-US gauge declined 1.3 percent last week to 108.99, extending its first monthly loss since October to 2 percent. That compares with a 2.3 percent drop for the TA-25 gauge. The Tel Aviv index gained less than 0.1 percent to 1,300.25 at the close in Israel today.

“There’s a very dynamic space for interest in this type of tech index,” Josef Schuster, founder of Chicago-based IPOX Schuster LLC, said by on Jan. 30. “There may be a market niche there.”

Schoenfeld created the BlueStar Israel Global Technology Index, a gauge of globally-listed Israeli tech companies that began trading in November and has gained 21 percent.

Before it's here, it's on the Bloomberg Terminal.