Global index provider MSCI is considering reassigning Israel to a new region, likely Europe, which would open the door to large amounts of passive inflows for the Israeli market, Trend reports with reference to Reuters.
MSCI, which provides equity, fixed income and hedge fund indexes, upgraded Israel from an emerging to developed market in 2010. It is the only country in the Middle East in that category and MSCI is now seeking market feedback on whether it should be regionally classified elsewhere.
Israel's security regulator cited MSCI as saying it was focusing on a reassignment for Israel to Europe, which would expose Israel's capital market to billions of dollars of possible new investment.
"The MSCI Israel Index has more economic exposure to Europe than to the Pacific and Middle East regions," MSCI said, noting the most exposure still comes from North America.
A decision will be announced on or before Feb. 22, 2022, MSCI said.
It also found that the "3-year pairwise rolling correlations" of weekly index returns show a higher absolute correlation between the Israeli index with the World, Europe and Pacific indexes than it does with the index for Gulf countries.
Israel left behind a lot of emerging market passive investments with its upgrade to a developed one more than a decade ago and daily trade volumes in Tel Aviv have still not fully recovered.