Playing the fiddle while TASE burns
Is it a divine decree by the lord of globalization that the Tel Aviv Stock Exchange subsists on leftovers from New York? How can Israel heal its enfeebled economy? Calcalist publisher Yoel Esteron speaks at the Calcalist Capital Market 2014 conference.
As the TA-25 index cruises at altitudes of 1,400 points and the TA-100 hovers around the 1,300 mark, why are we still so discontent? For each 100 shekels put into TASE a year ago, an 11-12 shekel yield was gained. Not bad by any standard. So why do we all feel our economy is ailing? And if indeed it is, what cure should we seek?
We know the market is under the weather simply because a 1.2 billion shekel trade volume is unsatisfactory. This is clear, and not only to well-seasoned investors who can catapult share-values on peanuts. TASE Director General, Yossi Beinart fantasizes about turnovers of 3-5 billion dollars, but at the present 10%annual increase rate, it'll take years until we see such volumes.
The matter of the fact is that the market is unhealthy because of failing to funnel the full potential of Israel's economy, and it surely is not generating any considerable growth. Big local money is seeping out to global markets in quest of bigger and better returns while only small foreign investments percolate into the country. Local IPOs are few and far apart and as such are almost an affront to the economy.
Our talented high-tech entrepreneurs are looking to New York and will not even consider a dual-listing while we are left with the uneasy feeling at the sight of our financial chiefs soliciting large companies and panhandling for listings on TASE.
Mellanox Technologies threw the towel in and delisted from TASE. Shame on us. But why are the likes of Check Point's Gil Shwed, IronSource's Tomer Bar-Zeev and Mobileye's Amnon Shashua fiddling while TASE – and Yossi Beinart – burn? Is it a divine decree by the god of globalization that TASE subsist on leftovers from New York?
If the answer lies in the privatization of the stock exchange, as in most developed countries and as some of the local heavy batters would like to see, than what are we waiting for? For the government? The Knesset? Haven't we come to terms yet with the fact that Tel Aviv's salvation lay not in Jerusalem?
As the country's business hub, Tel Aviv is accustomed to casting the blame for its financial mishaps on Jerusalem. Certainly the current administration carries responsibility for turning Israel into an international pariah and more than a few Knesset members are to blame for our economic deterioration, while regulators seem bent on keeping companies in a perpetual state of uncertainty.
However, if government action is needed to kick start the market, if it takes legislation to affect reform, than this can come to be only once the capital market, with all its malaise, is set at the top of the public agenda. Because only an active, and at times perturbing, public discourse can set the wheels in motion towards improving and boosting the market.
Since our lawmakers have a tendency to act only on issues that make headlines, it's time to pin this issue at the top of the public agenda, instead of just extrapolating about it in conferences.
Most of us probably think a public debate is a lost cause from the onset. Some businessmen and major rollers in the stock market will hurry to point a blaming finger at the apparent hostility towards business, a populist media that foments anger towards the business world and the heated debates on social networks.
True, the current sentiment, the media and the social networks are far from merciful towards the business sector and this is no soon-to-fade fad. Most likely, the entire sector will be made to pay for the sins of some of its prodigy children and bear the public's mistrust as a consequence of infringements made at its very heart.
Last year's conference was held on the backdrop of the demise of IDB's Nochi Dankner and of some fishy debt arrangements by Ilan Ben-Dov, Moti Zisser and other masters of leverage. By this point, we are all post-traumatic. The new helmsmen at IDB have yet to gain our trust. They have a better shot at it if the public sees they are able to conduct an actual dialoged – not one facilitated by lawyers and messengers.
Generally speaking, the contaminated fallout from that dark era of dubious capital market deals has not completely dissipated. Under such circumstances, public mistrust is justified and it's up to would-be borrowers of public funds to prove they are trustworthy once again. Double responsibility lies on the shoulders of those willing to lend out the public's money.
Still, it is a clear matter of public interest to have a vibrant and growing market in Israel.
What, then, is to be done? I can only offer a general idea. It is up to the professionals and regulators to install the nuts and bolts. At the bottom line, it's no rocket science or a voyage to the edge of space with Virgin Galactic.
Ethically speaking, the laws, rules and ethics paramount for the good health of the market must be reviewed, and just as important – enforced effectively. You want a healthy economy? Treat its ailments – such as structural conflicting interests between investment-management and underwriting; between insurance market players and themselves, and last but not least – the reciprocity in executive compensation approvals in the institutional investment market.
Additionally, the rotten apples – some of which are agents of the underworld – should be promptly removed from the market. They should not be allowed to use the capital market as their personal money changing outfit, and hopefully, the police and the anti-money laundering authorities, as well as ISA, know who they are.
At the same time, structural and practical changes are called for. An effective reform should be laid out and implemented. The Committee for Improving Tel Aviv Stock Exchange Trading Efficiency and Liquidity toiled over its report for more than a year. And although it's difficult to discern which of its conclusions should be placed front and center in such a reform, we should be asking, right here, right now, what in the world are we waiting for?
Yoel Esteron is the publisher of the Calcalist business daily.
