A survey carried out by Deutsche Bank among foreign investment institutions active in Israel has found that not one of them considers the decision by MSCI to upgrade Israel from emerging market to developed market status to be positive for the local stock market. The survey finds that overseas investors intend to pull their money out of Israel in 2010.
The survey results leave no room for doubt. 78% of the respondents said the decision to upgrade Israel was negative, while 22% said it would have no effect.
Israel will officially become part of the MSCI developed market indices in May 2010, and, according to the survey findings, 56% of overseas investors plan to change their investment portfolios in 2010 and to reduce their exposure to Israel. It should be pointed out though that about 90% of the participants in the survey said that they were already underweight on the Israeli market. It is therefore possible that the damage from money being withdrawn will not be as great as feared.
Most of the survey participants believe that Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA)is likely to benefit from MSCI's move, while shares of the banks, of telecommunications companies, and of other local companies will lose out.
Most of the respondents to the survey were investors in emerging markets. The questionnaire was also sent to hedge funds and investors in developed markets, but they showed little interest. Deutsche Bank explains that Israel's upgrade is not a material event for investors in developed markets.
A further interesting point is that Deutsche Bank itself does not believe in the results of its own survey. Its analysts believe that the decision by MSCI to upgrade Israel is another link in the chain of the Israeli economy's progress since the hyper-inflation of the 1980s.
Published by Globes [online], Israel business news - www.globes.co.il - on June 22, 2009
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