Aug 9 The Tel Aviv Stock Exchange (TASE) said on Sunday it was considering a year-long plan to revamp its main indexes in a bid to make the bourse stronger and more attractive to investors.
The TASE has been trying to tackle falling trading volumes and a rise in delistings, which started after MSCI upgraded the bourse’s status to “developed” from “emerging” market in 2010, diverting away investment.
In addition, many Israeli companies – especially in high-tech – opt for the bigger and more liquid markets of New York or London for more exposure, or go for private funding.
Share volumes have picked up this year to average 1.4 billion shekels a day in the first seven months of the year, up from 1.21 billion in 2014, but still lag an average 2 billion shekels a day seen in 2010.
The number of companies listed in Tel Aviv has fallen to 465 from the 654 in 2007, although some delistings stemmed from mergers and acquisitions.
The new plan aims “to improve the stability of TASE’s indices and significantly reduce the risk undertaken by investors and index tracking instruments,” it said in a statement.
Exchange officials have already begun discussing the plan with market participants. Should it be approved, the plan would take a year in 12 monthly steps, the TASE said.
About 95 percent of investment in the exchange is through its flag indexes — the blue chip, mid-cap, broad index and banking index.
Under the proposed reform, the blue-chip index would expand to 35 companies from 25 and the mid-cap to 125 companies from 100.
The 10 biggest companies would hold less sway. Their weight in the TA-25, for example, would slip to 40 percent from 71 percent.
Teva Pharmaceuticals has the highest weight at 11.4 percent of the blue chip index, followed by Israel’s two largest banks, Hapoalim and Leumi at 9.3 percent and 10 percent, respectively.
The TASE management said it may also tighten requirements for companies to be included in the lists to maintain their quality. The minimum float requirement for company shares held by the public would jump to 35 percent from 30 percent.
In addition, two new equal-weight indices, including one blue-chip index made up of just the 12 biggest companies, could be formed.
Last month, the TASE’s members approved a demutualisation plan under which it would become a for-profit entity. ($ 1 = 3.8015 shekels) (Reporting by Ari Rabinovitch, Editing by Steven Scheer and Raissa Kasolowsky)