The countdown to the MSCI reclassification for the Israeli capital market as a developed market, due in May 2010, continues. Market sources believe that, in the short term at least, the result will be that foreign investors will withdraw money from the Tel Aviv Stock Exchange (TASE) because the market will comprise a smaller share of developed market indices than it currently does on emerging market indices.
Market sources believe that these withdrawals will take place in late 2009 or early 2010 as the deadline for the reclassification nears. The Bank of Israel's monthly capital movement reports therefore make interesting reading.
The July report, published today, shows that foreign investors sold TASE-listed stocks, but that direct investment continued.
In July 2009, foreign investors sold a net $36 million of shares on the TASE, similar to the amount in June. Most of the sales were of chemical companies and bank shares. Capital market sources told "Globes" that the sales were mostly of shares in Israel Chemicals Ltd. (TASE: ICL) and Makhteshim Agan Industries Ltd. (TASE: MAIN).
Foreign investors sold a net $210 million of Israeli government bonds: they sold $307 million of TASE-listed bonds, which was partly offset by $103 million in purchases of government bonds traded abroad. Foreign investors bought $66 million of Israeli corporate bonds. $9 million were of TASE-traded corporate bonds and $57 million worth of corporate bonds traded abroad.
Nonresident direct investment via the banking system in July totaled $342 million, similar to the average monthly level in 2009. Most of the investment was in the chemical and high-tech industries.
The Bank of Israel also reports a sharp increase by Israelis' investment in foreign securities. Israelis' foreign portfolio investment totaled $1.09 billion in July, including $923 million in stocks, of which institutional investors bought $770 million, and $173 million in bonds. In January-July, Israelis' investment in foreign equity totaled $4.1 billion, compared with an average of $2.8 billion for each of the previous three years.
Israelis' direct foreign investment via the banking system was a negative $54 million in July, representing net sales.
Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2009
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