In many ways, the Tel Aviv Stock Exchange (TASE) is one of the last remaining bastions of public, nonprofit trading in the developed world.
This may be about to change, however, with the TASE set to be privatised as part of broad and sweeping capital market reforms throughout the whole of Israel. At the heart of this transition is an ongoing shift from banks to institutional investors and households, which is placing an increased emphasis on the private sector and for-profit growth.
In this article, we’ll look at the immediate impact of privatization on the TASE, while asking what this will mean for the Israeli economy overall.
What will Privatisation Mean for the TASE?
The first target for the bourses’ chief executive (Ittai Ben Zeev) is to complete the process of turning the TASE into a for-profit entity, with this endeavor requiring court approval before it can be cast in stone.
Similarly, Zeev is also focused on convincing prominent, Nasdaq-traded companies including Wix.com Ltd and CyberArk Software Ltd. to list on the TASE, while promoting the privatization of government-owned firms who can then become part of the exchange. These strategic steps will help to improve the appeal of the TASE among domestic and foreign investors alike, which will prove crucial if the exchange is to thrive as a private, for-profit entity.
The next stage of Zeev’s plan is to launch an IPO on the exchange in 2019, as this will take the entity public and afford it far greater profile at home and abroad. Once again, this will make the type of foreign investors active here far more likely to back listed companies, while over time it will establish the TASE as a prominent driver of Israel’s capital markets and sustained economic growth.
How will this Strategy Impact on the Economy?
For some, the privatisation of the TASE is long overdue, despite the fact that this move will create significant regulatory challenges for financial regulators and fiscal policy makers.
This will certainly have a positive impact on the Israeli economy, primarily because it will create far greater connectivity between the nation and Asian capital markets including Singapore and Hong Kong. This will boost trade and overseas investment, driving significant increases in growth and profitability in the process.
Even in the build-up to privatization, the TASE has seen a significant increase in IPO activity and public listings. Tech companies have become particularly popular in recent quarters, with exits in Israel totaling $7.44 billion in 2017 and ticket sizes averaging $106 million during the same period.
All in all, this represents extremely positive news for Israel and investors, so long as the new, for-profit exchange is stringently regulated.