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Where Have They Gone?

Where Have They Gone?. October 2001 Stephen Levey. Foreign Investors in israel. Who are they? When did they go? What’s left? Are they coming back?. Who are the Foreign Investors?. Global Emerging Market Pension Funds (Schroders, Gartmore)

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Where Have They Gone?

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  1. Where Have They Gone? October 2001 Stephen Levey

  2. Foreign Investors in israel • Who are they? • When did they go? • What’s left? • Are they coming back?

  3. Who are the Foreign Investors? • Global Emerging Market Pension Funds (Schroders, Gartmore) • Global Emerging Market Mutual Funds (Fidelity, Capital) • Technology Funds (Seligman) • Hedge Funds (Moore Capital)

  4. MSCI GEM Benchmark Country Weightings • Israel accounts for 5% of the MSCI GEM benchmark • If foreign investors followed this benchmark strictly, it would mean US$4bn in Israeli equities!

  5. Double Whammy! How and When the Foreigners Left • Today, the average GEM Fund has only a HALF weighting in Israel • This number started to fall as the Intifada got going… • …and fell further as Nasdaq declined

  6. MSCI Constituents - Weights • Checkpoint and Teva make up almost 50% of the MSCI Israel, or 2.5% of the whole MSCI GEM Index • A zero holding in these stocks is VERY high risk due to their high weightings • Most funds own only these stocks

  7. Technology Funds • The “Big Five” are the only ones that really count to global PMs today - CHKP, CMVT, MERQ, DOX and ORBK • There are a group of stocks that global tech funds may occasionally review - NICE, PRSE, RDWR, DSPG, ZRAN • Going forward, small cap IPOs of Israeli tech companies will be FAR HARDER than the last bull market… • …although Given Imaging proves that all hope is not lost! • (We assume investors DO have memories!)

  8. Hedge Funds • Lack of shorting capabilities often deters hedge funds from the TASE • This is not the case for Nasdaq, where many hedge funds have been “short” the more liquid stocks during the downturn • Expect hedge funds to remain active in the Israeli technology names, for better or worse!

  9. Conclusion • Foreign investors DO NOT have to be in Israel and ARE NOT coming back to the TASE while the geo-political situation remains as it is. • Emerging markets investors will continue to own Checkpoint and Teva due to the large weightings in the Index. • Hedge funds will continue to trade the technology stocks aggressively • Technology investors will focus on the “Big Five” for now • All foreign investors will be far more selective about the quality of IPOs they will consider investing in going forward

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