From the end of today's trading session, MSCI will start to use the American Depositary Receipt (ADR) listing, trading on the New York Stock Exchange, instead of the local Tel Aviv Stock Exchange listing for Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) in the MSCI Israel Index. Following this change, exchange traded funds (ETFs) that track the index have to sell Teva shares in Israel and buy them in the US. Because of this, there was a high volume of trading in Teva shares at the close today on the Tel Aviv Stock Exchange.
IBI analyst Steven Tepper says that the change will not affect Teva's share price or overall trading volumes in the stock, but it will adversely affect trading in the stock in Tel Aviv, and hence total trading volumes on the local stock exchange.
The holdings in Teva of funds that track the MSCI index are estimated at NIS 2 billion, about 4% of the company's market cap. Over the past six months, average daily turnover in Teva shares has been about NIS 100 million, some 10% of total turnover on the Tel Aviv Stock Exchange.
It looks as though arbitrage traders bought Teva shares on declines in Tel Aviv with the aim of selling them to ETFs that need to buy them again in the US. Most of the trading will have been back-to-back at the closing stage. Teva's share price was down fairly sharply today.
Mylan may delist
Trading volumes on the Tel Aviv Stock Exchange look set to take another blow shortly, if Mylan decides to delist. When Mylan listed on the exchange, as part of its effort to take over Perrigo (which failed), it undertook to remain for a year. The year will be up during November. Over the past year, Mylan has attracted average daily turnover of NIS 28 million in Tel Aviv.
The failure of the bid for Perrigo means that the main motivation for being listed in Tel Aviv has disappeared. All the same, Mylan is in the leading indices on the Tel Aviv Stock Exchange, so that the listing has benefitted it. The company is currently not very active vis-a-vis Israeli investors. Mylan has yet to declare what it intends to do, but if it does decide to delist, the decision will, as mentioned, represent a further blow to business on the Tel Aviv Stock Exchange, and the move will cause volatility in the stock indices.
Published by Globes [online], Israel business news - www.globes-online.com - on October 31, 2016
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