10/04/2012 23:01–Last week’s column looked at the problem of declining trading volume on global stock exchanges over recent years, and especially this year. Let’s continue this discussion by bringing it home to the Tel Aviv Stock Exchange (TASE), where the problem not only exists, but is particularly acute.
The data are clear cut and – I’ll spare you the detailed numbers – they show that turnover on the Israeli equity market shriveled in 2012 much more, in fact about twice as much than was the case in the world as whole, or in the developed markets of Europe and North America. However, as noted so often, it is wrong to cite statistical data out of context, and in this particular case, the context is very complex.
First of all, although Israeli trading volume shrank sharply this year, in both relative and absolute terms, its relative performance last year and over the period since the crash of 2008/09, was better than the global average. Taking into account the longer-term picture, in which Israeli turnover soared from 2003 onwards, raises the possibility that this year is an aberration.
Also, when comparing Israel’s stock market trading volume to others, a comparison with developing markets seems more apposite than one to developed markets.
Finally, and perhaps most surprisingly, the data show that while turnover in equities has indeed plunged, that is definitely not the case in the bond market. On the contrary, bond volumes have risen this year to record levels.
In other words, a fuller review of the data forces one to redefine the question quite radically. It is not merely “why has trading volume in Tel Aviv fallen twice as much this year as has been the case globally?” Rather, it is something like: “how come trading volume in Tel Aviv has plunged davka this year, but not previously, and only in equities, but not in fixed income – and is this development significant, or is it likely to prove transient?” Obviously, that is a much more complex question, which is unlikely to have an easy answer…Read More>>