It appears that not everyone is enthusing about Israel's imminent admission to the OECD. Merrill Lynch research analyst Haim Israel warned today of the negative impact of the move. "Israel's admission to the community of developed markets may be cause for celebration for the politicians, but it will be a mortal blow to the Israeli capital market."
Israel, who was addressing 150 CFOs at the annual CFO Forum in Eilat, said that the local economy accounts for just 2% of the MSCI Emerging Markets Index, and its share in the global investment pie would fall to 0.2% if Israel is admitted to the developed markets index. "The moment Israel is defined as a developed rather than an emerging market, not one foreign investor will invest time and resources here, and this will herald the end of the era of foreign investment in Israel," he predicted, adding that the switch to the developed market category would be a "natural disaster."
"Although we may think that we're the center of the world and that the Israeli capital market is among the leaders, in practice Israel is traded at "Under Perform" in terms of foreign investors. Although foreign investment in Israel has totaled $1 billion since the beginning of the year, it is only 63% of Israel's share on the emerging markets index," said Israel.
Tal Liani, telecommunications analyst at Merrill Lynch, tried to sound a note of optimism after the dire predictions of his colleague. "We are looking at it from the narrow, rather than the broader perspective. True, we are not growing like India and China, and there's nothing that can be done about that. So Israel does not entirely fit into the emerging market category. In the final analysis, Israel is the third largest country in the world in terms of technology, and we should all remember this," he said.
Published by Globes [online], Israel business news - www.globes.co.il - on June 20, 2007
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