Tel Aviv Stock Exchange: The Heart of Israel's Tech-Focused Economy

A futuristic display in the lobby of the TASE highlights its focus on tech companies

A bull inscribed with the names of TASE-listed companies projects confidence in Israel's economy (Photos: James S. Galfund)

Ringing the opening bell on the first official day of the new TASE (Photo courtesy of the TASE)

On July 8, Israel launched Operation Protective Edge to put an end to relentless rocket attacks emanating from terror groups in Gaza.  Over the ensuing weeks, over 3,500 rockets were launched at Israel.  And yet, despite a complex military operation involving ground and air combat and thousands of troops, the flagshipTA-25 Index rose 1.2 percent - despite a concurrent slump in global equities - and an August 11 Bloomberg article observed, “Capital keeps pouring into Israel.”

What’s Israel’s secret?  After all, years after declaring independence in 1948, Israel remained an agrarian nation with an economy more akin to socialism than capitalism.  In the ‘80s, the nation suffered from hyperinflation exceeding 400 percent.

Nevertheless, in June, Israel became only the 20th nation to join the exclusive Paris Club, comprised of influential nations that assist poor, indebted economies.  The Associated Press declared Israel’s admission to the Paris Club gave the country “an international boost of recognition for its economic accomplishments.”

To uncover the answers, a representative from Development Corporation for Israel/Israel Bonds – the organization founded in 1951 to help strengthen Israel’s economy – visited the Tel Aviv Stock Exchange (TASE) during the height of Operation Protective Edge.  The head of the TASE’s research department, Kobi Avramov, says although the exchange dropped when the conflict was launched, a quick recovery and ongoing strong performance, even as fighting continued, clearly demonstrated “Investors believed in the strength of Israel’s economy.”

Today’s TASE, recently re-located to a high-tech, environmentally green building that opened its doors in late July, is a far cry from the exchange’s humble origins, which date back to the pre-state year of 1935.  That was when it first took root as the Exchange Bureau for Securities, founded by a conglomerate of banks and brokerage firms.  Eighteen years later, in the aftermath of Israel’s independence, the Tel Aviv Stock Exchange was incorporated.

A Tech-Focused Exchange

Avramov says 500 companies are presently listed on the TASE.  Unsurprisingly, given Israel’s global reputation as a technological innovator, tech companies comprise 25 percent of all listings, with 125.  Real estate is a distant second with 99.  The TASE’s mission statement is also tech-focused, emphasizing the exchange’s goal of “position(ing) Israel as an international financial center for the listing and trading of technology companies.”

The effort to attract technology companies to the TASE took a quantum leap forward in 2013, with the establishment of a committee comprised of representatives of the Finance Ministry and Office of the Chief Scientist, as well as regulators tasked with making it easier for tech companies to issue IPOs and be listed.

The committee provided a series of recommendations and now, says Avramov, “companies can come to us, the procedure is easy and we also offer tax incentives.”

Pro-Active Research

The TASE proactively solicits companies recommended by its Research Division. Specifically, says Avramov, the exchange strives is to attract small-to-medium sized technology companies, including companies located in the U.S.  “Large companies,” he says, “go to NASDAQ,” although he notes there are some dual-listed companies on the TASE.  Currently, 51 TASE companies are dual-listed on either NASDAQ or the London Stock Exchange.
 
Avramov says a unique feature of the TASE is its ability to provide investors with “one-stop shopping,” pointing out that the exchange offers trading in convertible securities, government and corporate bonds, T-bills, exchange-traded products, options and futures ,“all under one roof.”

Sky-Rocketing Capitalization

Over the past two decades, the market capitalization of the TASE has skyrocketed.  In 1994, the market capitalization of listed companies was $32.7 billion; as of July 31, the value had exceeded $218 billion.  Israel’s consistent economic performance, its admission to the prestigious Organization for Economic Cooperation and Development and, of course, its trailblazing tech sector, have all contributed to the explosion in the value of stocks listed on the exchange.
 
In quantifying the reason why investors remain bullish on Israel despite periodic conflict, TASE spokesperson Idit Yaaron explains, “People who know Israel know the past shows this is what happens.  They understand that in spite of this, investing in the TASE is not only an investment in Israel, it’s a good investment.”

“Don’t stop buying Israel bonds,” adds Avramov,” but also invest in the Tel Aviv Stock Exchange.”