Tel Aviv Stock Exchange comes of age

World Business spoke with Ester Levanon, CEO of the Tel-Aviv Stock Exchange (TASE) on 20 September - the day that the TASE was promoted and reclassified from Advanced Emerging to Developed status by the FTSE Group.

by Morice Mendoza, World Business
Last Updated: 23 Jul 2013

WB: The Tel-Aviv Stock Exchange was given developed status today by the FTSE Group. Why is this so important to you?

We have benchmarked ourselves against other stock exchanges and have tried our best to match up to the best. There are two ways of thinking about the development of a stock exchange. One way is to say, "Okay, we are an emerging market. Let's not develop now because being an emerging market is the flavour of the month." This is like a pauper on the street trying to ask for money. That's not my point of view. I think our exchange should be as advanced as possible. And we'll do our best to convince everyone that they should invest in the Tel-Aviv stock exchange because it is a good country to invest in. Eventually this approach brings you to the top.

WB: What is your next big challenge?

My goal is to take the TASE global, to promote the country in such a way that an Israeli company would not need to go to a foreign market just to get a good valuation. My thinking is that if you get a good valuation for an Israeli company in London, they should be able to get the same quality of valuation in Israel. You should then have foreign investors who invest in London also choosing to invest in Israel.

WB: Are there any examples of this happening?

In February, Haifa Refinery was privatised and it decided to list on the TASE. And they were courted by the biggest exchanges in the world. Its leaders managed to sell everything they wanted in Tel-Aviv. Some big investment houses came from London. But everything was sold on the TASE platform. It showed we are able to do it. Haifa Refinery is an exception because it is a big company. But I believe that this case has shown people that it is a good market and that it is transparent. We can show people this is a safe place to invest in - as safe as London, Paris or the United States.

WB: Are foreign investors put off investing in TASE because of the risk of further conflict in the Middle East region?

Last summer Israel had a war with Hezbollah based in Lebanon. In September we had a conference in New York with Nasdaq. I was reluctant to go there expecting to be questioned about the conflict. But nothing happened to the TASE index during the period. It dropped 8% in the first two days and then stabilised. Since the war I think the index went up by 25%. So when I went to New York to speak to investment houses and they started telling me that from their point of view the risk of investing in Israel was less than they thought before.

We always thought there would be a war and no one knew what would happen to the stock market. Now we know. Nothing happens. So we see that prices in Israel already incorporate this risk factor. The Japanese build their houses in such a way so they can cope with an earthquake. We probably have built our country in such a way that it can withstand incidents like the conflict in Lebanon. We came to London in part to see the buildings (Lloyd's, Bloomberg and the LSE) because we are planning a new building for the TASE. And I was amazed to see that they are more worried about security than we are.

WB: How has the recent turmoil in the global financial markets affected TASE?

First of all I'd say that this is the price of being globalised. We can either be a closed market influenced only by what is happening in Israel or be open to the world. I don't like the closed route. When I said the market went down [after the outbreak of war in Lebanon] by 8% this drop was only because of the Israelis. In this case the foreign investors stabilised the market. But part of being globalised is that things that happen elsewhere will affect you. Yesterday the TASE went up sharply just because of the US Federal Reserve's decision to cut its interest rate by half a base point.

WB: Developing close relations with the major stock exchanges around the world is an important part of your strategy. You have already achieved dual listing arrangements with the LSE and major US exchanges. How do you achieve this?

WB: We do not object if Israeli companies want to list on major international exchanges such as New York, Nasdaq or the LSE. Israel has much to offer companies but up to a point. And if a company can get more exposure on Nasdaq I'd be the last one to tell the company not to go there. So if it is good for them, I believe it will be good for everyone. Therefore, it is important to have good relationships with the big stock exchanges.

WB: You are known to get on very well with Clara Furse, the chief executive of the LSE. Do you go out of you way to build these kinds of personal relationships?

Like all things in life everything is based on personal relationships. I have a very good relationship with Clara. We met a few times and we hit it off. I like her very much. Somehow she found time to speak to me on this visit. Also, I have a very good relationship with Catherine Kinney, President and Co-Chief Operating Officer of NYSE Euronext. I started this trip as a holiday in France and met with Catherine in Paris where she is now based. I am a great believer in personal relationships but it must be based on real business issues.

WB: Are you hopeful there will be peace in the Middle East?

Sadly, the prospect of peace does not seem to get any closer. During the last war I became less optimistic even though I am by nature an optimist. The level of hatred from Hezbollah, which was nothing to do with us at the time, really frightened me. It was also frightening at the same time to see how much Al Qaeda hates everyone. What has the world done to them? I really hope for peace. In Israel when I was a child people said, "When you grow up you will not need to serve in the army." Then I had a son and we went on saying the same thing. Of course he did and now we have a grandson who is 16 months old and I hope he won't have to serve in the army.

WB: Do you have any vision of the region post-peace?

I think it would be nice to have one united stock exchange in the Middle East. We are all Semites. They are Arabs and we are Jews. But there are a lot of similarities and we are living in the same region. Look what happened in Scandinavia with the birth of the OMX Nordic Exchange. We had a meeting with the Palestinian Stock Exchange in 2000 before the Intifada started. When I presented the TASE I spoke about an alliance and they were quite shocked. But that is my personal view about the issue. Nothing came of it because of the Intifida.

WB: What do you need to do now that you have gained FTSE developed status?

We have to change our marketing strategy and court not the emerging market funds but the big investment houses and pension funds and try to convince them that although we are a small market it is a very interesting market to go to. We can offer them a highly regulated market with better yields than other markets. I would also like to see our regulators getting dual recognition with other regulators so we would jointly recognise a prospectus for a company. This would mean that a company could easily raise money in both markets. That is something we are looking for and we have started to make progress in getting our first dual recognition agreement made with one country (which I cannot divulge at this stage).

WB: Has any comparable stock market achieved dual recognition with regulators in this way?

Not to my knowledge. But we are in the advanced stages.

WB: So you could be the first?

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