Despite the war and the escalation of tensions in the Near and Middle East, the TA-35 index, which tracks the 35 largest caps on the Tel Aviv Stock Exchange (TASE), has risen by over 13% since the start of the year, outperforming our beloved Euro Stoxx 50 by a wide margin. Similarly, the MSCI Israel is up 14% over the same period. How is it, then, that a country at war is performing well on the stock markets in such a volatile environment?
The TA-35 is TASE's flagship index, representing Israel's 35 largest listed companies in terms of market capitalization and liquidity. Similarly, the TA-90 and TA-125 represent the mid and small caps segments of the Tel Aviv Stock Exchange. The flagship index is made up mainly of financial companies, which account for 32.5% of its value, closely followed by technology players at 22%, and finally the real estate sector, which makes up 9.5% of the index.
Banks Leumi Le-Israel BM and Hapoalim are among the largest capitalizations, at $14 billion and $13 billion respectively. Teva Pharmaceutical Industries, operating in the pharmaceutical sector and valued at $19.5 billion, is the next largest capitalization in the index. Finally, Nice Ltd is the largest tech stock in our index. The company provides enterprise software that offers customer and regulatory solutions, as well as cybercrime prevention.
A market escaping instability
Israel has metamorphosed from an emerging country to a "start-up nation", establishing itself as a world leader in innovation. Its dynamic ecosystem, supported by a government policy focused on R&D, early technological education and a culture of entrepreneurship, has enabled the emergence of numerous start-ups. It's not for nothing that Israel's coastal plain is nicknamed the "Silicon Wadi" - in reference to Silicon Valley - affirming Israel as a technology hub with the highest density of engineers in the world.
The narrowness of its domestic market and its regional isolation are driving Israeli companies to focus on the international market. Highly dependent on foreign funding, Israeli tech companies are often based in the United States. Most of them, even though they may be listed on the TASE, generate most of their sales on the American or European continents. It is for these reasons in particular that the Israeli stock market is little affected by the regional instability facing the country.
The MSCI Israel is an index composed of Israeli large caps listed in Israel or abroad - well, in the USA. This time, the index is heavily exposed to the technology sector (44%), followed by financials (29.8%) and healthcare (14.8%). In addition to the aforementioned stocks, we have big names such as Check Point Software, Monday.Com, CyberArk Software and Wix.com. These companies - all listed in the United States - are Israeli technology firms that have performed extremely well since the beginning of the year, which explains the momentum of the Israeli stock market.
The MSCI index is also broken down into sub-indices: Value, Growth, IMI, Mid and Large Cap.
Three ETFs tracking Israeli companies:
- iShares MSCI Israel ETF: the tracker is designed to track the MSCI Israel index. Fees are 0.59% for assets under management of USD 147 million.
- VanEck Israel ETF: this tracker seeks to replicate as closely as possible the performance of the BlueStar Israel Global (BLSNTR) index of listed Israeli companies. Fees are 0.59% for assets under management of USD 77 million.
- ARK Israel Innovative Technology ETF: Cathie Wood's active fund is designed to track publicly-traded Israeli companies whose core business activities are driving innovations in genomics, healthcare, biotechnology, manufacturing, the Internet or information technology. Fees are 0.49% for assets under management of USD 98 million.
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.