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 A special unit has been formed by the Israel Securities Authority
(ISA) to ensure investors are protected and not being misled, agency
chair Anat Guetta told Reuters.
Guetta also said Israel may expand its dual-listing arrangements to
include Australia as it tries to connect with more foreign markets
and draw investors to recover trading volumes lost a decade ago.
One of the fastest growing segments on the Tel Aviv Stock Exchange (TASE)
is medical cannabis and the sector got a boost in January when the
government approved exports.
About 26 listed companies have a link to medical cannabis, up from
19 in December, with a combined market value of 3.4 billion shekels
($952 million). Most are at an early stage without revenues. Some
shares are up hundreds of percent since the start of 2018.
"I don't think that we can avoid a bubble," Guetta said. "Bubbles
are part of the nature of markets, of capital markets, but we can
provide our investors the right tools to manage those risks
properly."
Though the onus ultimately lies with investors, she said the ISA had
formed a special unit to monitor the sector while tightening
disclosure requirements from companies in the field.
Benefiting from a favorable climate and expertise in medical and
agricultural technologies, Israeli companies are among the world's
biggest producers of medical cannabis. Two former prime ministers
and an ex-police chief are among high-profile individuals to join
companies' ranks.
Cannabis stocks may be high, but overall trade volumes are sluggish
and have not recouped the flows lost when MSCI upgraded Israel to
developed market status from emerging in 2010.
Tel Aviv share volumes averaged 1.1 billion shekels a day between
January and April, down 19 percent from a 2018 average and half
levels of a decade ago. In the same period, the TASE lost more than
150 listed companies.
To help lure new issuers, the bourse has forged dual-listing
partnerships with markets in New York, Toronto, London, Singapore
and Hong Kong.
"We are considering the ability to have such an arrangement with the
Australian stock exchange and currently it's under consideration,"
Guetta said before flying to Sydney for a regulators conference.
"Our visit will give us better knowledge about this issue."
Twenty Israeli companies are listed in Australia and Australian
groups own about 10 percent of the TASE, which was demutualized last
year.
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Separately, Guetta on Tuesday signed an agreement with her French
counterpart to cooperate on innovation, investor protection and
regulatory issues related to blockchain, crypto-assets and
artificial intelligence.
The ISA has come under fire from some companies and investors for
being heavy-handed, but Guetta, who took office last year, said the
agency has eased the burden on companies.
More worrisome is that Israel's own high-tech sector, widely
regarded as second only to Silicon Valley, has bypassed the local
bourse.
"The fact that money is very cheap and there is no regulation makes
the private capital market very attractive for issuers," Guetta
said.
At the same time, institutional investors in Israel, who manage more
than $500 billion of public savings, are unfamiliar with and so have
largely stayed away from tech investments.
Now the ISA is forming a committee with industry leaders to try to
bridge the gap, Guetta said, to coach them on pricing and research
of tech companies.
To entice foreigners, Guetta said she was accelerating plans to
allow companies to report in English in addition to Hebrew, and move
to a more friendly reporting format.
(Editing by Mark Potter)
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