The global stock index provider Morgan Stanley Capital International (MSCI), one of the largest stock index providers in the world, announced recently that it opened a consultancy process with regard to Israel’s possible inclusion in its European indices.
The decision is expected to be reached at the end of February 2022.
Such a decision will have a favorable impact on the Tel-Aviv Stock Exchange and on the securities listed on it. This since Israel will also be added to dozens of MSCI’s secondary European indices.
The significance of the consideration of Israel as part of the European territory and its inclusion in the indices is that, when global investment entities allocate investments to Europe, some of these investments will flow to Israel and serve as a “booster” to the Israeli economy. The assessment is that Israel’s inclusion in the MSCI Europe Index will result in the allocation of more than half a billion dollars to purchases of Israeli companies’ securities.
MSCI Europe Index
Up until now, MSCI had refrained from including Israel in its European indices. Instead, Israel was included in a designated index “Europe and Middle East,” which did not benefit from any massive inflow of money. The Tel-Aviv Stock Exchange has tried to change this decision over the years but without success. Now, there is a real chance that Israel will succeed in being included. It depends, inter alia, on the results of the survey that MSCI is conducting for this purpose.
Financial and asset managers who wish to complete the questionnaire and to support Israel’s inclusion in the MSCI Europe Index, can fill it here
The questionnaire may be submitted until January 31, 2022. MSCI is expected to reach its decision by February 28, 2022.
Salient points supporting Israel’s inclusion in the MSCI Europe Index:
1. Israel is already considered by many economic organizations as being part of the European territory in relation to many financial and economic aspects.
2. Israel is not assigned to any major MSCI territory in terms of indices, which is illogical considering the strength of the Israeli economy.
3. Investors in MSCI’s European indices are currently losing out on an opportunity to diversify their investment portfolios due to the non-inclusion of Israel. They are also losing out on an opportunity to be exposed to the Israeli currency, the ILS, which is a strong currency that is continuing to appreciate. Investors are also being denied the opportunity of being exposed to the Israeli high-tech industry.
4. Israel’s inclusion in the MSCI Europe Index will enable managers of investment products to invest in Israel. Today, many managers are complaining that they are prevented from investing in the Israeli market due to this exclusion.
5. The European indices have lower representation of high-tech companies compared to US indices. Israel’s inclusion in the MSCI Europe Index will make the index more competitive against the US indices in this regard.
6. Israel’s non-inclusion in the MSCI Europe Index causes investors in the index to lose out on exposure opportunities to about 45 Israeli high-tech companies that were considered unicorns and offered on the NASDAQ in recent years. Eight percent of all technology companies in the world deemed unicorns were founded in Israel.