Trading volumes in the stock market on the Tel Aviv Stock Exchange have jumped since the beginning of 2022, from an average level of approximately NIS 1.8 billion in 2020 and 2021 to approximately NIS 2.4 billion on average in the first quarter of 2022.
The average daily trading turnover in 2016-2019 was about NIS 1.3 billion, so the current trading volumes reflect a dramatic increase in daily trading.
The overperformance of the local stock indices relative to the global stock indices in 2021 and no less the overperformance of the domestic market since the beginning of 2022, have increased the interest of Israeli and international investors in the Israeli stock market and the result is an increase in daily trading volumes on the Tel Aviv Stock Exchange.
Some attribute the jump in trading volumes in January-February 2022 to investors’ preparations for the entry of the Israeli stock market into the MSCI EUROPE index, but this thesis was disproved as the high trading volumes were maintained even after the disappointing decision.
Moreover, the important work done by representatives of the Securities Authority and the stock exchange in an effort to mobilize foreign investors to support Israel’s inclusion in the European index has significantly increased the exposure of the attractive Israeli story among active investment managers overseas. A record of the last decade in the amount of about 13 billion shekels.
The dramatic increase in the supply of companies that have joined the Tel Aviv Stock Exchange in the last two years also makes a significant contribution to the increase in trading volumes, but it should be said that most of the increase in trading volumes focuses on companies included in the TA-125 index. Enjoy the sharp rise in first-line stock liquidity.
The murderous attacks in Israel, along with the fear of security escalation in the month of Ramadan, worries investors, but unfortunately, the veteran investors are used to detaching the fears and anger from making investment decisions and basing investment decisions on the security reality of Israel’s economy.
The brutal war in Ukraine reminded investors around the world that the geopolitical risk in the world is not entirely focused on the Middle East in general and Israel in particular.
Despite the tremendous momentum in trading volumes on the Tel Aviv Stock Exchange, there is still a long way to go in encouraging liquidity and tradability, and especially increasing liquidity and tradability in third-tier stocks, which do not enjoy the sharp rise in trading volumes in Tel Aviv Blue Chips.
Regarding tradability and liquidity on the Tel Aviv Stock Exchange, it is important to know the structure of the trading day, which is divided into 5 phases: pre-opening phase, opening trading, continuous trading, pre-closing phase and closing auction. The tradability in the opening tender and the closing tender are major liquidity events on the trading day, which are important for every investor to know.
The opening trading phase is the second in the trading stages on the stock exchange, where multilateral trading takes place on each security separately, and at the end a price is determined for each security that constitutes the opening price. Orders submitted in the pre-opening phase are executed according to the opening rate, and this happens for a few seconds.
Opening trading centers on an average of 3% of daily turnover, ie about NIS 60-70 million relative to turnover in 2022. This average figure is skewed upwards due to the expiration of derivatives, which occurs once a week, with the monthly expiration taking place on the last Thursday of the month. relatively. Investors looking for liquidity can take advantage of the opening phase on expiration days to enjoy improved liquidity.
The closing trading phase, which takes place at the end of the trading day, is conducted as a multilateral trading, in which a price is set separately for each security. The transactions resulting from the orders that were in the order book at the pre-lock stage are carried out at the lock gate. At the end of the process, the closing rate is set and it produces a major liquidity event on the trading day. Trading at this trading stage centers about 10.5% of the average daily turnover, ie about NIS 240 million per day, but this figure is also skewed in relation to the median daily figure of about 7% of turnover. The reason for the difference between the average tradability figure and the median tradability figure is the updates of the indices that take place at the closing stage and the fact that the end of trading in Tel Aviv coincides with the opening of trading in the US. “The liquidity on the Tel Aviv Stock Exchange is increasing significantly. The fact that the passive instruments and active mutual funds arrive at the end of the day to cover the exposure they need also supports increased liquidity in the closing tender.
Investors should be aware of the benefits of the various trading stages on the stock exchange as well as the notable liquidity events, which include, among other things, derivative expiration dates, monthly and semi-annual parameter updates of stock and bond indices, and index index and global index editors such as MSCI. FTSE RUSSELL and P&S, which have indices that include significant holdings in Israeli shares.
For more information about the stages of trading on the stock exchange: https://info.tase.co.il/Heb/trading/trading_phases/Pages/trading_phases.aspx