"The Tel Aviv Stock Exchange (TASE) is one of the world's ten cheapest markets. In 2011, in line with the global trend, the Israeli market fell. But internal and external forces last year resulted in only a partial correction in Israel, while all other markets enjoyed rising prices. Distortions tend to be closed, so I believe that we'll ultimately close the gap," says UBS Wealth Management Israel Ltd. chief investment officer Kobi Feller.
Feller joined UBS Israel two years ago to set up the branch's wealth management unit. He says that the decision to establish the activity was made after UBS AG designated Israel as a strategic target. "The bank carried out a thorough study, which included the amount of the public's assets and the accumulation of new wealth. When it was completed, the bank marked Israel, Brazil, and Mexico as the three markets with the greatest potential."
Surprisingly, while many sources in the Israeli market believe that Israel suffers from over-regulation, UBS says that this is an advantage. "Like other foreign investors, UBS seeks the certainty that regulation creates. The bank operates according to meticulous standards and rules, and from this perspective, regulation is an advantage. The more a market is supervised and controlled, the easier it is for the bank to operate in it," says Feller.
Feller says that one of the factors which adversely affected the TASE was Israel's switch from the MSCI emerging markets index to the developed markets index in late 2010. "Were Israel still included in the emerging markets index, the TASE would be 10% higher," he says. "The reclassification as a developed market slowed the rate of rises, which had been strong until then."
Feller is nonetheless optimistic, and explains why the TASE is attractive. "It should be remembered that in addition to being inexpensive, the TASE offers sector diversity. In my opinion, the Tel Aviv 25 Index does not necessarily represent the capital market's performance, because there is a big difference between it and the Tel Aviv 75 Index and the Mid-Cap Index. This is because of the composition of the Tel Aviv 25 Index, in which specific shares affect the whole index. The other shares are still traded cheaply."