TASE's Global Leap to Attract Foreign Investors

The Tel Aviv Stock Exchange embraces global standards, revolutionizing its dividend reporting to magnetize foreign investment and boost market confidence.

Published May 24, 2024 - 00:05am

6 minutes read

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The Tel Aviv Stock Exchange (TASE) is taking significant steps toward integrating global best practices into its operations, a move aimed squarely at enhancing transparency and attracting more foreign investment. Among these initiatives, a critical regulatory change is set to come into effect on February 1, 2025: companies listed on TASE will be required to report dividends on a 'per share' basis, much like their counterparts on leading exchanges in the United States and the United Kingdom. This harmonization with international norms is expected to make Israeli markets more accessible to foreign investors, improving the liquidity and dynamism of the financial ecosystem.

At present, more than 75% of companies trading on the Tel Aviv bourse have preemptively adopted this practice, indicating a market ready for evolution. The Israel Securities Authority and the finance minister's approval will enshrine this reporting mechanism, which will also grant corporations the ability to adjust their final dividend per share amounts up to two trading days before the record date. It offers a blend of transparency for investors and flexibility for companies, a balance geared towards economic growth.

Financial metrics are already reflecting the positive impacts of these changes, with the Tel Aviv exchange presenting a healthy financial outlook. A 7% rise in adjusted net to 27.8 million shekels ($7.6 million) and an 8% increase in profits to 108.3 million shekels have been reported. Concurrently, the market cap of equity firms enjoyed a 9% surge in the first quarter, hitting 1.15 trillion shekels, complemented by a 7% uptick in daily trading volumes.

The broader ramifications of TASE's strategic shift cannot be understated. By mirroring the operation schedules of global markets, with planned Friday trading poised to align with Wall Street and European exchanges, TASE aspires to secure a place within MSCI's Europe category. Such global synchronization not only elevates the Israeli market's international profile but propels its integration into the interconnected web of global finance, strengthening economic and national resilience.

The integration of global best practices by the Tel Aviv Stock Exchange could not come at a more opportune time. The financial world is increasingly interconnected, and the appetite for transparent, easy-to-navigate markets is at an all-time high. By moving to 'per share' dividend reporting, the TASE is shedding local idiosyncrasies that may have previously deterred cross-border investments. This move simplifies valuation models for analysts and aligns investor expectations with a familiar framework, thereby reducing the barriers to entry for international capital.

The path that led to these reforms was paved with extensive consultations with various stakeholders. Investment communities, financial experts, and corporate leaders have been engaged in dialogues to assess the effects of such regulatory modifications. Their feedback has underscored the necessity of adopting a standardized approach to financial disclosure, a change that is poised to boost the Israeli exchange's profile among emerging market bourses - especially those competing for foreign inflows.

This regulatory change is part of a wider vision that TASE has been working towards. In an endeavor to increase its appeal and functional compatibility, the exchange has been modernizing its technological infrastructure, adopting cutting-edge systems that provide better services for real-time trading, clearing, and settlement. There is a concerted effort to bolster cybersecurity, ensuring robust protection against the increasing threat of cyberattacks which can destabilize financial markets. Enhancements in trading technology not only strengthen security but also improve the speed and efficiency of transactions, important factors for day traders and long-term investors alike.

One of the remarkable implications of these steps is the potential for increased Initial Public Offerings (IPOs) and the entry of new sectors into the stock market. Innovative, high-technology companies, which constitute a significant portion of Israel's economy, might find a reformed TASE to be a more attractive venue for raising capital. The country's reputation as a 'Start-Up Nation' underscores its potential to generate attractive, high-growth investment opportunities for global portfolios.

While the imminent regulatory change puts the spotlight on dividends, the TASE has also been actively considering reforms in other areas, including corporate governance, disclosure standards, and environmental, social, and governance (ESG) criteria. These initiatives are intended to bolster the trust of international investors in Israeli firms and to solidify the exchange's standing among the most progressive markets in the world with respect to holistic corporate responsibility.

Moreover, the successful implementation of such reforms could lead to greater alignments with other financial trends, such as the increasing focus on sustainable investments. By enhancing its ESG reporting requirements, the TASE can attract a new wave of conscious investors. The integration of sustainability into its core activities reflects a future-forward approach and demonstrates mindfulness about the social and environmental footprints of listed companies.

Indeed, the ultimate goal of these changes goes beyond mere technical adjustments. The TASE is aspiring for an elevated status that may welcome further international collaborations, listing agreements with other exchanges, and dual listings that can expose firms to a broader range of potential shareholders. The strategic refashioning of the Israeli stock exchange exemplifies an acute awareness of its place in the world and its vital role as a gateway for international investors into Israel's robust economy.

As the TASE gears up for February 2025, when the 'per share' dividend reporting becomes mandatory, market participants are watching closely. The adaptability of Israeli companies and their swift embrace of the new standards bode well for a smooth transition. If these reformed practices yield the growth and investment attractiveness that the TASE anticipates, the exchange may soon find itself capturing a larger slice of the global capital pie, benefitting not just the Israeli economy but also offering a reinvigorated investment landscape to the world at large.


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