UBS AG (UBSN)’s Israeli wealth management unit is betting on natural gas production and the country’s admission into MSCI Inc. (MSCI:US)’s Europe index to lure investment and stoke asset growth.
“Israel’s gas findings are not yet priced in and will bring prosperity and growth to the economy,” Kobi Feller, chief investment officer at UBS Wealth Management Israel Ltd., said in an April 23 interview at Bloomberg’s bureau in Tel Aviv.
The nation’s Tamar field, estimated to hold 10 trillion cubic feet of natural gas, started production at the end of March. Israel’s central bank boosted its forecast for 2013 economic growth to 3.8 percent in December, from an earlier estimate of 3 percent, to take account of the gas boon. Tel Aviv’s benchmark TA-25 Index (TA-25) has fallen 2.6 percent since output started March 30.
UBS, which opened the Israeli wealth-management subsidiary in February last year, sees the country as a “strategic growth market” for the industry along with Brazil and Russia, Feller said. The unit’s Hebrew-speaking team has gained 10 members to 40 employees in the past year, according to Feller, while UBS has cut 10,000 jobs from its investment banking business worldwide. UBS is the first foreign bank licensed to manage shekel assets as well as offshore investments, he said.
Speculation that Israeli equities will soon be included in MSCI Inc.’s Europe index “will bring more investors and fresh money to the local market,” Feller said.
MSCI, a New York-based provider of indexes and portfolio analytics, upgraded Israel to developed market status from emerging market in May 2010. The shift to the MSCI World Index (MXWO), which reduced Israel’s weighting from 2.5 percent to 0.85 percent, led to a decline in foreign-investor holdings of Israeli stocks, the central bank said in a March 12 report.
Trading in Tel Aviv fell to a six-year low in the second half of last year, the country’s securities regulator said April 23. Volumes may rebound should Israel be included in the MSCI Europe as investors who follow the gauge would buy the nation’s equities, Ester Levanon, chief executive officer of the Tel Aviv Stock Exchange, said in May.
“Our main challenge for the coming year is to raise awareness that we’re also managing shekel investments,” UBS Wealth Management’s Feller said. “The home bias in Israel is huge compared to other countries.”
Gross domestic product in Israel expanded 3.1 percent last year, according to the government statistician, while growth in the 34 Organization for Economic Cooperation and Development countries averaged 1.4 percent in 2012. The TA-25 gauge rallied 9.2 percent, trailing the MSCI World measure’s 13 percent jump.
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