"Dual listing continued to be an ongoing and positive process at the TASE. In
2001, 12 new companies were added. In January 2002, Compugen also double
listed The total is now at 15," said Prof. Yair E. Orgler, Chairman of the Board of
Directors of the TASE at the recently held annual meeting with the foreign press.
Furthermore, to encourage investors to greater activity and a resulting gain in
the volume of trading, institutional and retail Israeli investors have been granted
exemption from capital-gains tax on investments in dual-listed foreign
companies.
In addition, in August 2001, tax regulations were amended in Israel, making
dual-listing very attractive to foreign companies. Another advantage is that
institutions and private investors may buy and sell, due to the seven hour time
difference between New York and Tel-Aviv. This gives traders the equivalent of
two to non-stop trading sessions and adds a globalization flavor.
"One third of the total TASE market capitalization is NASDAQ related and TASE
share price movements, generally, follow those on NASDAQ. The graph
sshowing the price movemenst of the two Exchanges are quite similar.
However, the Tel-Aviv 100 Index in 2001, was only 16% down by while NASDAQ
was 39% lower," pointed out Prof. Orgler.
When share prices fall and trading volumes decline, as was the case in 2001,
fixed income trading swells. Share trading turnovers slumped to a daily $64
million in 2001 in comparison with a $115 million average in 2000. The TASE was
negatively affected by the global and local recession and by conflict in the area.
The fixed income market benefited from the above developments, as well from
falling interest rates.The Government of Israel raised $9.4 billion in 2001 as
compared with $5 billion in 2000. Daily turnovers rose sharply from $74 million in
2000 to $130 million in 2001.
Computerization of trading was enhanced and the expansion of stock trading
volume capacity was achieved. "On the day that trading was six times average
volume it only accounted for 10% of the total capacity. (Our calculations indicate
that it would imply a maximum capacity of $3.8 billion worth of share trading). A
securities advisor in a commercial bank active on the capital market pointed out
that "the computerized system of trading works fine, as one buys directly
opposite the seller and the transactions are completed instantaneously".
Manipulation of share prices, which was common before computerized trading
was put into operation, has almost been eliminated, as the system will not
accept orders in excess of a 35% price change from the previous trade.
Saul Bronfeld, TASE Managing Director, in reply to a question from IHTIR
regarding low level trading liquidity, (some shares do not trade for many
months), said that last year more than 100 shares issues were cited for delisting.
Another 150 issues are being currently examined as prospects for delisting due
to liquidity issues, market capitalization and distribution among investors.
On December 23, 2001 the Governor of the Bank of Israel announced a 2%
reduction in the Israeli prime rate to 3.8%. A fairly rapid 10% devaluation of the
New Israeli Shekel versus the American dollar followed over a period of six
weeks. The previous currency rate versus the dollar was seen as too high and
some observers felt devaluation was justified. The rate cut was followed by a
rally in shares, which reversed direction as the NASDAQ trended lower. "A shift
to equities will take place if interest rates stay low and devaluation stabilizes,"
opined Mr. Bronfeld.
As to the possibility that the Government may finally impose a capital gains tax
Mr. Bronfeld said that he maintains a reasonably social conscience regarding
taxation. "I am not against taxation but it should be done in harmony with
imposing taxes on all capital markets."
