Meaning of Israel's Upgrading to DM

The British have upgraded Israel to DM (Developed market) while leaving Taiwan and South Korea EM (Emerging market). The meaning of the action is that big funds specializing in DM will buy Israeli stocks and those EM will dump them. The difference may be positive to the level of 2 - 3 billion dollars of new investment in Israel. The main beneficiaries will be the heavy well capitalized stocks, like Kil, TEVA, Bank Hapoalim, Bank Leumi, The Israel Corp. Israel held 2.2% of the Emerging Market and now is expected to hold 0.2% of the Developed Market. New York holds half of the DM worth. What is beautiful in the mere insignificance of Israel is that minute improvement in the international political situation of Israel may cause a flood of incoming investment and demand for Israeli stocks.

Haim Israeli from Merryl Lynch has a different opinion.

Should Morgan Stanley upgrade Israel's status to a developed economy, that would be a catastrophe. Israel would drop from a 2.5 percent share of all the emerging markets to only a 0.3 percent share of developed markets - among this share Teva would rise from 45 to 65 percent [of Israel's relative weighting]. No analyst will invest the necessary time to understand the Israeli economy, its politics and Israel's stature in the world, in order to invest only 0.3 percent of his money, especially while most of it goes to Teva anyway. Changing the status will only scare away investors, as Israel will have to take on markets such as Japan, the U.S. and Europe.

Addendum: The numbers made me aware of the magnitudes: TASE is 0.2% of the market, while NYSE is 50%. We are less than half percent of them. It is therefore logical that TASE follows NASDAQ like a dog, trying to anticipate NASDAQ's emotional state.