The recent attacks on Israel by the Hamas militant group have had a significant impact on Israel-focused ETFs. Here’s a summary of the situation:
Impact on Israel-focused ETFs:
- The top four Israel-focused ETFs, with a combined AUM of $364 million, have all seen declines since the onset of the attacks.
- iShares MSCI Israel ETF (EIS): With an AUM of $130 million, this ETF saw a 7% decline on Oct. 9 but recovered about 2% by midday Oct. 10.
- ARK Israel Innovative Technology ETF (IZRL): This $92 million ETF dropped approximately 5% on Oct. 9.
- BlueStar Israel Technology ETF (ITEQ): Experienced a drop of nearly 3%.
- VanEck Israel ETF (ISRA): Fell by almost 6%.
- The unexpected attacks on Israel have sent shockwaves through financial markets worldwide.
- The death toll in Israel surpassed 1,000 on Oct 10, while over 830 Palestinians have lost their lives in Israeli counterattacks, as reported by NBC.
- Steven Schoenfeld, CEO of MarketVector Indexes and creator of the BlueStar Israel Tech ETF (ITEQ), anticipates continued volatility in Israeli equities in the upcoming weeks. He believes that Israeli tech companies, which primarily have global exposure, will likely outperform other Israeli companies that are more focused on the domestic market during this period of conflict and regional tensions.
Performance of Israeli ETFs Prior to the Attacks:
- Israeli sector funds were already underperforming and experiencing outflows before the conflict, mainly due to political disagreements and a market downturn.
- The iShares MSCI Israel ETF has declined over 9% year-to-date.
- These funds saw nearly $47 million in outflows this year following widespread protests in Israel against proposed judicial reforms that would have curtailed the power of the supreme court.
Potential Economic Impact:
- While the economic impact has been primarily confined to the natural gas sector and Israeli companies, there are concerns that the conflict could escalate, affecting global markets and potentially leading to a broader economic downturn.
- Israel has been a dominant player in the tech and defense sectors, particularly in cybersecurity. The mobilization of many tech workers to serve in the army could impact staffing at some of the country’s major tech companies.
- Schoenfeld highlighted the potential challenges for the Israeli tech industry, noting that some firms could lose 20% to 30% of their workforces as reserves are mobilized.
BlueStar Israel Technology ETF (ITEQ):
- Check Point Software Technologies Ltd (CHKP): Listed on the NASDAQ, this company has a significant weight of approximately 9.26% in the ETF. With a market capitalization of around $15.79 billion, Check Point Software Technologies is a leading provider of cybersecurity solutions.
- Amdocs Ltd (DOX): Another NASDAQ-listed company, Amdocs holds a weight of about 7.54% in ITEQ. The company, with a market cap of nearly $10 billion, specializes in software and services for communications, media, and financial services providers.
- CyberArk Software Ltd (CYBR): With a weight of 7.30%, CyberArk Software is a prominent player in the cybersecurity domain. Listed on the NASDAQ, the company has a market capitalization of around $7.02 billion.
- Nice Ltd ADR (NICE): Holding a weight of 6.66% in the ETF, Nice Ltd is a NASDAQ-listed company with a market cap of approximately $10.64 billion. The company offers software solutions that enable organizations to improve customer experience and business results, ensure compliance, and fight financial crime.
- Elbit Systems Ltd (ESLT): This company is listed on the TA (Tel Aviv Stock Exchange) and holds a weight of 5.29% in ITEQ. With a market cap of around $35.97 billion, Elbit Systems is an international defense electronics company.
These holdings reflect the ETF’s strategy to invest in leading Israeli tech companies that have a global presence and are at the forefront of technological advancements in their respective domains. The ETF aims to provide exposure to the innovative tech sector of Israel, which has been recognized for its significant contributions to the global tech industry.
- Camtek Ltd (CAMT): Listed on the TA exchange, Camtek Ltd has an asset weight of 3.43% in the ETF and boasts a market capitalization of approximately $10.57 billion.
- UroGen Pharma Ltd (URGN): Traded on NASDAQ, UroGen Pharma holds an asset weight of 3.17% in IZRL and has a market cap of around $412 million.
- ION Acquisition Corp 1 Ltd (IACA): This company, listed on the NYSE, contributes 2.94% to the ETF’s weight and has a market capitalization of roughly $340.9 million.
- Teva Pharma Industries Ltd ADR (TEVA): A significant player in the pharmaceutical industry, Teva Pharma is traded on the NYSE. It has an asset weight of 2.58% in the ETF and a market cap of about $9.89 billion.
- CyberArk Software Ltd (CYBR): As a NASDAQ-listed company, CyberArk Software has a 2.52% asset weight in IZRL and a market capitalization of approximately $7.02 billion.
- Ituran Location and Control Ltd (ITRN): This company, traded on NASDAQ, holds a 2.50% asset weight in the ETF and has a market cap of around $586.8 million.
- Check Point Software Technologies Ltd (CHKP): A major player in the cybersecurity space, Check Point is listed on NASDAQ. It contributes 2.49% to the ETF’s weight and has a market cap of about $15.79 billion.
- Wix.Com Ltd (WIX): A renowned web development platform, Wix is traded on NASDAQ. It has a 2.48% asset weight in IZRL and a market capitalization of roughly $5 billion.
- Sapiens International Corporation NV (SPNS): Listed on NASDAQ, Sapiens International has a 2.44% asset weight in the ETF and a market cap of about $1.5 billion.
- Hilan Ltd (HLAN): This company, traded on the TA exchange, contributes 2.42% to the ETF’s weight and has a market capitalization of approximately $4.33 billion.
The strategy of IZRL is to invest in Israeli companies that are leading in terms of technological advancements and innovations. The ETF aims to provide exposure to the growth potential of the Israeli tech sector, which includes areas like cybersecurity, pharmaceuticals, and software solutions.