Bethel Finance: Global market rally passes over TASE

www.bethelfinance.com

The Israeli economy is in better shape today than most countries around the world. Shares being traded on the Tel Aviv Stock Exchange (TASE) are not expensive, nonetheless, since the beginning of the year, foreign markets have been experiencing rallies. But on the TASE, trading is dwindling, returns lag far behind other markets, and it seems that this trend is only going to get worse.

Just five years ago, the picture was completely different. The TASE was at its height, its returns were higher than that of most other markets, foreign investors poured more and more capital into the local market, and almost 60 companies held IPOs in just one year.

So what happened? Some people are blaming tensions with Iran, or Israel's upgrade from the MSCI list of emerging markets to developed markets, and even the social protest. But the truth is that the process of decay in the TASE did not occur over the last few months. The TASE has simply not recovered from the 2008 economic crisis, and it is gradually drying up, and even the two excellent years 2009-2010 in markets did not alter the trend.

Average daily turnover on the TASE fell to a new low in February: NIS 985 million, 58% lower than 2007's average.

The number of companies traded on the TASE is dwindling, and the number of new companies that have listed for trading in the last two years can be counted on two hands. In contrast, dozens of companies have chosen to delist during this time due to their inability to raise capital on the one hand, and the high costs associated with maintaining a public company on the other.

"Globes" examined what happened to the TASE, and how it has reverted to a turnover and the number of companies listed that are similar to seven years ago. "Globes" found that the gloomy statistics are a result of a combination of several factors: foreign investors pulled out of the TASE, institutions transferred funds to overseas investments, and stricter regulations that are stifling the market.

Prospects are gloomy, and the lethargic trend does not look like it will change in the short term. TASE CEO Esther Levanon told "Globes" that she is concerned, but the solutions she is offering are mainly marketing related, and it is not clear how effective they will be.