Israel's weight in the MSCI All Country World Index dropped 33% Morgan Stanley Capital International yesterday published the constituents of its provisional index series, which serve as criteria for building investment portfolios the world wide.
Nessuah Zannex chief economist Shlomo Maoz predicts that other countries will regain lost allure when U.S. share prices rise again.
The most striking change in the All Country World Index is that the country weight of the United States increased by a huge 6.24% to 55.3%, at the expense of most of the rest of the world. It is believed that this change alone will induce the movement of $600 billion worth of investments as portfolio managers adjust to the index.
The United Kingdom's weight also increased sharply, by 1.06%, to 10.38%.
Israel's country weight difference in percent came to 0.07%. But when the new weight of 0.16% is seen against its previous weight of 0.24%, Israel's weight in the ACWI free index dropped by 33%.
The difference is sharp, but other countries suffered worse. Russia's weight decreased by 43% to 0.08%. Turkey's dropped by about 60% to 0.05%.
Nessuah Zannex chief economic analyst Shlomo Maoz says that Israel's weight in global GDP is 0.25%. Hence its weight in the ACWI is significantly below its contribution to world GDP.
Maoz does not believe that the change will substantially depress investment in Israel, if only because many investors have already sold their holdings.
He attributes the gargantuan leap in America's country weight to the slump in share prices, which has made many more attractive. Once substantial money has been diverted to American stocks, he says, share prices will climb again, restoring the attraction to investment in other countries.