MSCI has reclassified Israel as a "developed market", from its current emerging market status.
The change will come into effect as of May, 2010.
Israel will be included in some of the most widely-tracked global equity benchmark indices, the MSCI World Index and the MSCI EAFE (Europe, Australasia, and Far East) Index.
MSCI listed only one issue of concern, the relatively short settlement cycle for equities on the Tel Aviv Stock Exchange (TASE), but decided it should not prevent the reclassification of the Israeli market to Developed Markets status, although they would like to see a change in that matter.
Only securities of companies domiciled in Israel that have a listing on the Tel-Aviv Stock exchange will be eligible to join the MSCI EAFE and World indices.
Investors have generally been concerned that the immediate impact of a reclassification will be negative, since investment managers of emerging market funds will sell their Israeli holdings very quickly, while developed markets fund managers will take a while to build up their positions.
Another worry is that since Israel will have a relatively small weighting in the Developed Market universe, active investment fund managers (those not tracking a specific index) may choose to overlook most of the Israeli stocks, especially since Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA)alone represents a signficant proportion of the Israel index.
Korea, which was also reviewed, remained in the Emerging Markets index.
Published by Globes [online], Israel business news - www.globes-online.com - on June 16, 2009
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