Interview, Fireside Chat
Israel Graduates to MSCI Developed Market Index, Glenn Yago on the issues
- Israel's inclusion in the MSCI Developed Market Index is scheduled for May 26, triggering a weight reduction from over 3 percent to approximately 0.3 percent that could divert $1.7 to $2.5 billion in portfolio flows.
- Future recovery of these flows depends on attracting developed market investors, diversifying the competitive sector profile beyond information communication technology into life sciences and clean tech, and increasing the free float and investable shares of listed companies.
- The Tel Aviv Stock Exchange must incentivize additional share listings and consider privatizing remaining government-owned corporations via new joint ventures, indexes, or alternative investment products to meet developed market standards.
- To enhance liquidity and overcome information asymmetries, the market requires broader adoption of immediate English publication for financial reports and the introduction of new products such as unit investment trusts or ETFs.
- Current foreign investment is heavily concentrated in the top ten companies (93 percent) with 60 percent originating from the United States and 18 percent from Great Britain, leaving 590 other companies and new sovereign wealth funds as growth targets.
- Israel's strong macroeconomic position is supported by fiscal discipline during crises and an unemployment rate 30 to 40 percent lower than in many other countries, which may attract investors seeking to hedge against European risks despite potential export-side challenges.