Foreign investment in TASE quadrupled in 2005

Ministry of Finance: Concentration of ownership in Israeli public companies is 50%.

Foreign investors invested $2.02 billion in securities listed on the Tel Aviv Stock Exchange (TASE) in 2005, four times more than in 2004, the Ministry of Finance Supervision of Capital Markets, Insurance and Savings Division reports. Foreign investors invested $503 million in marketable bonds in 2005, but following interest rate hikes in Israel, $169 million worth of bonds were sold in the fourth quarter.

The Ministry of Finance also reports that the concentration of ownership in Israeli public companies was very high, at 50%. This is significantly higher than the 8.6% level in the US, 9.9% in the UK, and 20% in France.

The Ministry of Finance said an international comparison showed a high correlation between concentration of ownership in public companies and the structure of the financial system. The greater the banks’ domination of the financial system’s structure, the concentration of ownership in public companies. This applies to Israel as well. The ministry said one reason for this correlation was that domination by the banks came at the expense of a developed capital market. In other words, in countries with a market-oriented financial system, rather than a bank-oriented financial system, the capital market dominates the economy, a large proportion of the activities of public companies in those countries are financed directly through the capital market, and less from the banking system.

Published by Globes [online], Israel business news - www.globes.co.il - on January 25, 2006

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