Gateway to Israel: The lowdown on the Tel Aviv Stock Exchange

Since its founding in 1953, the Tel Aviv Stock Exchange has grown by leaps and bounds.

By NIV ELIS
Haredim at Bank Hapoalim 370 (photo credit: Amir Cohen/Reuters)
Haredim at Bank Hapoalim 370
(photo credit: Amir Cohen/Reuters)
Since its founding in 1953, the Tel Aviv Stock Exchange has grown by leaps and bounds. In May 2010, MSCI added the exchange to its developed-market index. In 2012, Bloomberg ranked the TA-25 Index as the highest on the Riskless Return Ranking, noting that it had returned 7.6 percent over the previous decade despite regional volatility.
Yet the exchange also faces challenges. Daily turnover at the exchange dropped from NIS 1.25 billion-NIS 1.5b. a day from 2008-10 to NIS 600b.-NIS 800b. a day in 2012, according to the Israel Securities Authority. Just 35 companies accounted for 85% of average daily trading volume. In July, the exchange’s CEO Esther Levanon and chairman Sam Bronfeld said they would step down, partly over differences of opinion with the ISA on how to move the exchange forward.
Bank Hapoalim head of equity research Yaron Fridman offers The Jerusalem Post a quick primer on the exchange, offering some points investors should know.
Who does the trading?
Commerce is conducted through the stock exchange by members: 11 local banks, three foreign banks, nine local brokers and four foreign brokers.
Like other advanced exchanges, TASE conducts its trades on a computerized system.How big is the exchange?
There are 519 companies that trade on the TASE, comprising a market value of NIS 631b. The largest company traded on the exchange, Teva Pharmaceuticals, has a market capitalization of $36b.
What is traded on the exchange?
Aside from stocks and bonds, several indices and stock derivatives are also traded on the exchange. The ISA hopes to further expand trading to include financial products such as credit default swaps (CDS), contract for difference (CFD) and separate trading of registered interest and principal of securities (STRIPS).
Who’s been buying stocks?
Foreign investors have been investing aplenty. In the first eight months of 2013, foreign buyers invested $1.2b. in the exchange. Fully 16.4% of shares are owned by foreign investors. Another 18.3% are held by institutional investors, while 65.1% are owned by Israeli investors.
Where is the growth?
It’s not the biggest companies that necessarily grow the fastest. Since the start of 2013, the TA-25, which includes the biggest 25 companies on the exchange, registered an increase of just 1.3%.
However, the TA-75, an index of the 75 companies behind the TA-25, grew 26.19% in the year to September. The TA Midcap-50, which includes the first 50 companies smaller than those on the TA-100, soared by 46.51%.
This article was produced in conjunction with Bank Hapoalim.