Capital market lacks investors, says PMO

Israelis are flocking to invest in another sector rather than the capital market, says top PMO official.

By SHARON UDASIN
Updated: JUNE 6, 2017 23:33
A man stands in front of an electronic board displaying market data at the Tel Aviv Stock Exchange (photo credit: REUTERS)
A man stands in front of an electronic board displaying market data at the Tel Aviv Stock Exchange
(photo credit: REUTERS)
The Israeli stock market is not attracting enough investors, the Prime Minister’s Office director-general Eli Groner warned on Tuesday.
“The capital market is in trouble,” he said. “There is no rush of investors to the stock exchange, and the Israeli public is afraid of it. Today, most people run to [put their savings into] real estate.”
Although buying real estate is complex and typically requires large sums, Israeli investors are flocking to this sector rather than to the local stock market, Groner said.
Foreigners are also exhibiting little interest in investing in Israel, he added, addressing participants in the annual conference of the Israeli Association of Publicly Traded Companies, held at the Tel Aviv Stock Exchange.
“We have a problem in the Israeli capital market – it is not sufficiently developed,” Groner said. “We need to further the efforts of all the relevant regulators and companies to make the market more attractive.”
While price-earnings ratios – ratios of company stock prices to earnings per share – and dividend yields demonstrate that Israeli investment opportunities are akin to those of the booming Wall Street years of the 1960s and ’70s, neither local nor foreign investors are aware of this, Groner argued.
Another issue, he explained, is the perception that Israeli stock market investments bear an “insane and unreasonable” risk premium. He stressed the importance of encouraging those who have recognized the investment opportunities present in Israel, saying they will be the first to profit.
Groner identified several possible explanations for the failures to properly assess the value of intangible assets such as stocks and securities that currently plagues Israel. One problem may be rooted in the high commission rates associated with the stock market, where people must pay 25% rates as opposed to 10% in the real estate sector, he said.
He also pointed to the Israeli banking system and the excessive regulation of the capital market as likely stumbling blocks to attracting investors to the stock exchange.
“Many people are afraid of this institution and think that it is a factory where the rules of the game are unclear, and that there are interests that are not transparent enough or are unfair,” Groner said. “On Wall Street, you can meet a lot of people who describe how hard it is today to find investment opportunities, and how easy it was in the ’60s, ’70s and ’80s. I have no doubt that in 15 years they will speak this way about the Israeli market.
“We all need to act to ensure that this day comes as quickly as possible,” he said.
"The capital market is in trouble," he said. "There is no onslaught of investors at the stock exchange, and the Israeli public is afraid of it. Today, most people run to real estate."
Although the real estate industry is a complex field that typically requires larger sums of money, Israeli investors are flocking to this sector rather than investing in Israeli stock market offerings, according to Groner. Even foreigners are showing very little interest in investing in Israel, he added, addressing participants in the annual conference of the Israeli Association of Publicly Traded Companies, held at the Tel Aviv Stock Exchange. 
"We have a problem in the Israeli capital market – it is not sufficiently developed," Groner said. "We need to further the efforts of all the relevant regulators and companies to make the market more attractive."
While price-earnings ratios – ratios of company stock prices to earnings per share – and dividend yields demonstrate that Israeli investment opportunities are akin to the booming Wall Street years of the 1960s and 70s, neither local or foreign investors are aware of these circumstances, Groner argued.
Another issue, he explained, is the perception that Israeli stock market investments bear an "insane and unreasonable" risk premium – the minimum amount of money in excess of a risk-free return that an investment will likely yield. Nonetheless, he stressed the importance of encouraging those who have recognized the investment opportunities in Israel, as they will be able to invest and profit before everyone else.
Groner identified several potential explanations for the gap in in valuation, or the method for assessing value of intangible assets like stocks and securities, that currently plagues Israel. One problem may be rooted in the high commission rates associated with the stock market, where people must pay 25% rates as opposed to 10% in the real estate sector, he said.
He also pointed to the Israeli banking system and the excessive regulation of the capital market as likely stumbling blocks toward attracting more investors to the stock exchange.
"Many people are afraid of this institution and think that it is a factory where the rules of the game are unclear, and that there are interests that are not transparent enough or unfair," Groner said. "On Wall Street, you can meet a lot of people who describe how hard it is today to find investment opportunities, and how easy it was in the 60s, 70s and 80s. I have no doubt that in 15 years they will speak this way about the Israeli market."
"We all need to act to ensure that this day comes as quickly as possible," he added.