Israel may end up with a net inflow of $1 billion in investments following a decision by the operators of the MSCI world index to classify Israel as a “developed” market instead of an emerging one. The new ranking will take effect next May, when the MSCI index will include several Israeli companies listed on the Tel Aviv Stock Exchange (TASE).
Israel stands to lose $2 billion in investments as investors who are more oriented towards speculative markets may pull out of Israel. The weight of Israeli stocks on the “developed stock index” is only .39 percent but will be much greater following the new classification.
Prime candidates for investment are Teva Pharmaceutical, Israel Chemicals and Check Point Software Technologies. These firms currently account for nearly three-quarters of the MSCI index.
The initial effect of the MSCI decision will be an outflow of funds as emerging funds managers sell off investments, while developed market funds will take several months or even a year before completing purchases.
The local stock exchange index has outperformed the Developed Market index so far this year but has done less well than the Emerging Fund Index.