Ronit Harel Ben-Ze’ev
Senior Vice President and Head of the Economic Department
August, 2006
Market Review
The TA-25 index reached a new peak in early May, 2006. However, share prices subsequently receded due to volatility in US markets and a sharp drop in prices in emerging markets. Hostilities in the north of Israel had little impact on the stock market and the financial markets until the latter part of July. Trading in the first half of the year was characterized by unprecedented volume of $320 million daily, some 45 percent above the daily average in 2005.
In the primary share market, Israeli companies raised $0.8 billion through 55 share offerings in the first half of 2006. Eleven initial public offerings about half were R&D companies accounted for 60 percent of the amount. The first half of the year slightly outpaced 2005, when a total of $1.5 billion was raised.
In the bond market, trading volume totaled $313 million a day, slightly above last year’s average. Trading in index-linked certificates (ETFs) on share indexes continued to rise, representing 19 percent of trading volume in stocks, compared to just 10 percent in the previous year.
News Headlines
Citibank Joins TASE
The Tel Aviv Stock Exchange Board admitted Citibank, N.A. as a member of the TASE. The bank has been active in Israel since 2000, operating through a branch in Tel Aviv. It offers a broad range of services in commercial banking, investment banking and private banking.
The addition of the world's largest banking group to the TASE is expected to increase the volume of activity by international investors. Citibank joins three other international banks that became members in recent years, a demonstration of confidence in the Israeli market.
Remote Membership
The Tel Aviv Stock Exchange enables financial institutions, that have no permanent representation in Israel, to become "remote members" of the TASE. Eligible companies are international banks and investment firms from specified countries that have been stock exchange members in their home countries for at least ten years on one of the following markets: the London Stock Exchange, Euronext, the New York Stock Exchange, DTB (Frankfurt), Eurex (Germany), SWE (Switzerland) or TSE (Tokyo).
Reform in the Government Bond Market
The Ministry of Finance has decided to establish an inter-dealer system for trading Government of Israel bonds and has chosen the MTS platform for this purpose. The TASE will collaborate in the implementation of the platform in several key areas. Transactions executed on the MTS system will be cleared by the TASE Clearing House, which will also operate a repo facility through which the Ministry will lend bonds to the primary market makers. The TASE will also disseminate trading data from the system, and will provide additional services to MTS and the primary dealers.
TASE Launches a New Product: "Shahar" Futures
In April, 2006, in response to the planned reforms in the government bond market, the Tel Aviv Stock Exchange launched futures on "Shahar" government bonds, a leading fixed income product. "Shahar" futures are structured like products in international markets to facilitate trading by international investors and banks. "Shahar" bonds, introduced to the market in August, 1995 are non-linked bonds bearing a fixed annual interest rate. "Shahar" is now the most actively traded bond in the fixed income market in Israel.
New Rules to Facilitate Listing by R&D Companies
In order to attract new high-tech firms to list their shares on the Tel Aviv Stock Exchange at a relatively early stage, new rules to facilitate listing by R&D companies were adopted in several key areas. Since then, 19 R&D companies have listed on the TASE.
Tel-Div 20 - the Index of Dividend Payers
The TASE launched the Tel-Div 20, a new index comprised of the 20 TA-100 stocks with the highest annual dividend yield. The new index will be updated twice a year along with the TASE's other leading indexes. Shortly after launch, an ETF tracking the index began trading on the TASE.
Market Makers on the TASE The TASE joined the world's leading stock exchanges with the ISA decision to allow market making in equities, bonds and derivatives. The TASE encourages market making and has integrated tools into the Tel Aviv Continuous Trading System (TACT) that monitor market makers. Since June, 2005, five market makers have been appointed for more than 70 securities.
New Product at the TASE: Covered Warrants To further expand the range of investment products, covered warrants on international indexes and commodities have been introduced to the TASE. The instrument complies with the TASE strategy of enabling investments in the international marketplace easily, proficiently and at low cost. The covered warrants join a growing number of advanced financial instruments, broadening the range of investments available to the public, such as TA-25 and other share index linked certificates (ETFs), reverse certificates and commodities.