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The Place To Be With Israel ETFs

March 22, 2019 11:12 am
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Israel is one of this year's more impressive ex-US developed markets. The MSCI Israel Capped Investable Market Index is up nearly 14 percent.

While the performance of that Israel benchmark is impressive, there are better avenues for investors looking to access Israeli equities via exchange traded funds.

What Happened

While many investors looking for technology exposure focus on Asia and the U.S., Israel undoubtedly has one of the world's most vibrant technology industries and that holds true across startups and established companies.

Financial markets continue recognizing the potency of Israel's investable technology universe. The BlueStar Israel Technology ETF (NYSE:ITEQ) notched another gain Thursday, on its way to another all-time high. Up almost 18.7 percent this year, ITEQ is beating the aforementioned MSCI Israel Capped Investable Market Index by nearly 470 basis points.

Why It's Important

ITEQ, which debuted in November 2015, tracks the BlueStar Israel Global Technology Index. That index “is the broadest, deepest and most complete benchmark of the Israeli Global Technology sector,” according to BlueStar.

Some of the ebullience surrounding ITEQ this year is attributable to mergers and acquisitions activity. The fund's second-largest holding is Mellanox Technologies Ltd. (NASDAQ:MLNX), which NVIDIA Corp. (NASDAQ:NVDA) is acquiring for $6.9 billion. That deal was reported on March 11 and ITEQ has made a series of record highs since then.

ITEQ makes for a solid alternative to traditional, diversified Israel funds due to the importance of technology in Israel's economy. Technology represents 45 percent of Israel's exports and 8 percent of its workforce. The MSCI Israel Capped Investable Market Index allocates just over 31 percent of its weight to technology stocks. While that's high compared to other developed, it may not adequately reflect tech's importance to Israeli economics and financial markets.

What's Next

Israel's tech sector is spread across multiple fast-growing segments, such as blockchain, cybersecurity, esports, fintech, health care innovation and much more. Agri-tech, an often overlooked technology concept, is also a major driver of Israel's tech sector.

“During 2017, the total investment in agri-tech in Israel was 141 million U.S. dollars. Israel is considered to be listed as the top five countries in the global agriculture sector, according to the Israeli government,” reports Xinhua. “Israeli agri-tech industry grows constantly. Over a quarter of the Israeli companies in this filed were founded during the last five years, and half were founded in the last ten years.”

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