Analyst doubts benefit of FTSE upgrade for Israel
Reuters quotes Daniel Rappaport of Leader Capital Markets as saying Teva will be only stock to gain.
Erez Wollberg 2 Oct 07 22:45
A report from "Reuters" casts doubt on whether the recently announced upgrade of Israel to "developed" status by FTSE will be to the benefit of the Tel Aviv market. The report says it may be better for Israel to be regarded as an emerging market, and that that way it will probably be able to attract more foreign capital.
The upgrade was announced on September 20. It will come into effect in June 2008. Merrill Lynch has estimated that the upgrade will lead to an inflow of some $3 billion into the Israeli stock market. However, Reuters quotes Daniel Rappaport of Leader Capital Markets as saying, "Most of the passive money investments are made according to the Morgan Stanley Capital International index. This is why not much will happen."
Rappaport mentions the example of Greece, which was promoted to developed market status by MSCI in 2001. "We saw a rally that was driven by hedge funds and the anticipation of strong inflows. Once the buying was finished, the market lost focus and a year and a half later, flows were weaker, volumes were weaker and the market drifted off and didn't go anywhere," Rappaport told Reuters.
Rappaport sees dual-listed pharmaceuticals company Teva as the only company likely to benefit from the change at FTSE. According to him, Teva is 40% of an Israeli portfolio in the MSCI index and should rise to 60% in any developed portfolio. "The Israeli market would then become a Teva trade. The price would be determined by Nasdaq (activity) and that would damage Israel's market," Reuters quotes Rappaport as saying.
Published by Globes [online], Israel business news - www.globes.co.il - on October 2, 2007
