Israel is saying shalom, as in good-bye, to emerging market status and is joining the ranks of the developed world according to MSCI index classifications. Israel will now be included in the MSCI EAFE index with a current weighting of 0.83% as well as the MSCI World and Kokusai Indexes, according to a recent report from Bank of America Merrill Lynch (BAS-ML).
Graduating to developed market status means more dollars from passive investment strategies (index funds) with potential net inflows of $2.8-billion, according to BAS-ML. Apparently there are $15 in developed market passive strategies for every $1 in emerging markets.
The biggest winner will be TEVA Pharmaceutical (TEVA) due to its disproportionately high 60% weighting on Israel’s stock market and the fact that 90% of shares traded are in the U.S., according to BAS-ML.