El Al and Doral Energy to Join Tel Aviv 35 Index, Replacing Three Companies
Translated & summarized from Calcalist by baba
El Al Airlines and Doral Energy will join Israel's Tel Aviv 35 stock index on November 5, replacing Damari, Shufersal, and Cannon, which will move to the Tel Aviv 90 index. New TASE rules aim to reduce volatility by phasing in new stocks with reduced initial weightings. El Al's inclusion follows a stock surge, while Doral Energy benefited from renewable energy sector growth. The departing companies faced sector-specific challenges.
The story in 6 lines · by baba
- El Al and Doral Energy will join the Tel Aviv 35 index, replacing Damari, Shufersal, and Cannon.
- The index changes take effect on November 5, impacting ETF trading worth approximately 10 billion shekels.
- New TASE rules will phase in new stocks with reduced weightings to manage market volatility.
- El Al's stock surged recently, contributing to its inclusion in the index.
- Damari, Shufersal, and Cannon are expected to see net buying demand after moving to the Tel Aviv 90 index.
- Significant turnover is also expected in other TASE indices like the Tel Aviv 90 and SME60.
El Al Airlines and Doral Energy are set to be included in the Tel Aviv 35, Israel's flagship stock market index, replacing Damari, Shufersal, and Cannon. The changes, which take effect on November 5, will see the three departing companies move to the Tel Aviv 90 index. This rebalancing is part of the Tel Aviv Stock Exchange's (TASE) efforts to manage market volatility and ensure smoother integration of new stocks.
Despite entering the prestigious Tel Aviv 35, El Al and Doral Energy are expected to face net selling pressure from exchange-traded funds (ETFs) as they are bought by funds tracking the 35 index and sold by funds tracking the 90 index. El Al anticipates over 300 million shekels in net outflows, while Doral Energy's will be relatively lower. Conversely, Damari, Shufersal, and Cannon are projected to benefit from net buying demand as they exit the 35 index and enter the 90 index, with Damari and Cannon each expecting over 250 million shekels in net inflows, and Shufersal over 150 million shekels.
The TASE has implemented new rules following significant fluctuations during the previous index update in May. These rules aim to spread demand for newly added stocks over time and mitigate losses for ETF investors. Under the new regulations, stocks entering the Tel Aviv 35, 90, or 125 indices for the first time will initially receive a reduced weighting factor of 0.25, gradually increasing over subsequent quarters. This phased approach is designed to ease market absorption and prevent sharp price movements.
El Al's inclusion comes after a recent surge in its stock price, reportedly linked to an attempted attack on a Flydubai plane. Doral Energy secured its spot due to the strong performance of renewable energy stocks earlier in the year, despite a recent dip in its share price. The companies leaving the index faced challenges: Damari was affected by weakness in the residential real estate sector, Shufersal by a poor second-quarter earnings report, and Cannon by investor dissatisfaction with its investment in another company.
Significant turnover is also expected in other indices, including the Tel Aviv 90, SME60, Growth, Real Estate, and Technology indices. The TASE will also adjust stock weights within indices based on changes in registered shares, public holdings, and liquidity tiers. The impact of these index adjustments on stock prices has already begun and is expected to continue until the ETFs make their trades on November 5.
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