TASE Index Rebalancing Looms as Real Estate and Retail Giants Face Exclusion
The Tel Aviv Stock Exchange is bracing for its index update, with contractor Yigal Damri, Shufersal, and Kenon facing potential exclusion from the TA-35 index amid shifting market values.
As the Tel Aviv Stock Exchange (TASE) prepares for its index rebalancing on November 5, the "ten determining trading days" are set to begin this coming Thursday. For at least one prominent figure, this is a period of intense pressure. This marks the fourth consecutive time that contractor Yigal Damri faces potential exclusion from the TA-35 index.
In previous rebalancings, he fought to remain through various strategies: raising capital repeatedly to a total of 1.4 billion NIS, selling land, and reallocating shares within the group. He even attempted to prepare for the subsequent index updates by granting options to institutional investors worth another 420 million NIS.
However, this time the task appears even more challenging. The "determining days" conclude on October 15, after which the qualifying market capitalization will be calculated, multiplying the average share price over those 10 trading days by the number of registered shares. To survive the update in the TA-35, a stock must rank among the 39 largest on the exchange. Damri currently ranks 47th with a market cap of 8.76 billion NIS, reflecting a broader downturn in real estate stocks over the past six months. For comparison, Meitav Investment House ranks 39th with a valuation of 10.2 billion NIS, meaning Damri needs a market cap boost of 1.4 billion NIS—a formidable task even for him.
Yet Damri's potential exit from the TA-35 is not the only impending shift. Currently, two other stocks are poised to leave the exchange's flagship index: the supermarket chain Shufersal, controlled by Yossi and Shlomi Amir, which is also on track for exclusion, ranking 42nd with a market cap of 9.68 billion NIS. The stock dropped 12.5% over three days following weak second-quarter earnings that showed sluggish in-store sales and declining profits.
The third fluctuating stock is Kenon Holdings, controlled by Idan Ofer. The holding company, which controls energy firm OPC and previously held shipping company Zim, returned to the flagship index only during the last update and is now facing exclusion again. However, ranking 40th on the exchange with a market cap of 10.1 billion NIS, either Kenon or Shufersal could still alter the outcome.
If these three stocks indeed drop out of the TA-35, they can partly "blame" cybersecurity giant Palo Alto Networks, which trades at a staggering valuation of 965 billion NIS and towers over the TASE. Palo Alto listed on the exchange via a dual listing roughly six months ago and entered the TA-35 in August via a "fast track" (where no other stock is removed at entry), leaving the TA-35 with 36 stocks and necessitating the removal of at least one stock in the upcoming semi-annual update. Palo Alto will continue its phased integration in the upcoming rebalancing, raising its weight to 2.56% in both the TA-35 and TA-125 indices, and is expected to attract high demand exceeding 800 million NIS.
Energy Companies Battle for Inclusion
Because at least one stock must leave the index to return to the original count, the number of incoming stocks will depend directly on the departures. To enter the index independently, a stock must rank among the top 30 non-included companies on the exchange. Currently, no stock meets this threshold on its own, meaning the number of additions will be determined entirely by the number of exits.
The leading candidate for upgrade to the index—where companies enjoy prestige, investor attention, and high liquidity—is renewable energy firm Doral Group, which boasts a surge of over 200% over the past year. It currently ranks 34th on the exchange with a market cap of 11.5 billion NIS.
However, Doral is locked in a head-to-head race with rival renewable energy firm Energix, owned by Alony Hetch. Energix was ejected from the index a year and a half ago and is also experiencing positive momentum, though its shares rose "only" 48% over the past year, placing it 35th with a valuation of 11.4 billion NIS. Of course, both could potentially be promoted depending on the final count of departing stocks.
A less likely scenario at present is the return of hotel chain Fattal Holdings to the index, which could happen if it manages to overtake Doral, Energix, or both in the remaining days, subject to available slots in the TA-35. Fattal currently ranks 36th on the exchange with a market cap of 10.8 billion NIS.
Shifts in the TA-90 and Beyond
Significant changes are also anticipated in the TA-90 index (and consequently the TA-125). Aside from the incoming demotions from the TA-35, construction company Tidhar has practically secured its spot in the TA-90 following its recent IPO, ranking 51st on the exchange with a market cap of 7.7 billion NIS.
Further down the queue are biotech firm Alpha Tau (ranking 52nd), which also joined the TASE this year via a dual listing, pending liquidity compliance. Following them are chipmaker Telsys, infrastructure firm Afcon, and real estate developer Avisror, all strongly positioned to enter the TA-90 and TA-125 indices. All of these trade at market capitalizations exceeding 3 billion NIS, placing them between 70th and 74th among secondary-tier stocks. The final stock currently in contention for entry is defense simulator firm Bagira, trading at a valuation of 2.96 billion NIS.
On the flip side, stocks firmly on the chopping block to leave the TA-90 include Electra Real Estate, which operates in US multi-family housing, fuse manufacturer Aryt Industries, and semiconductor firm Qualitest. All three have lost between half and two-thirds of their value over the past six months and now trade at valuations of 1.3 to 1.7 billion NIS—far below the 2.1 to 2.2 billion NIS threshold required to maintain their index status.
They are not alone. Concrete manufacturer Akwaplan has also shed a quarter of its value, trading at 1.83 billion NIS and heading toward index exclusion. Additional stocks on the bubble include income-producing real estate firm Sela Capital, Property & Building (part of the Discount Investment Corporation group, which controls Gav-Yam), and defense optics firm RP Optical. Each of these hovers around a valuation of 2.1 billion NIS.
Clinging closely to them but currently keeping their heads above water are Mor Investment House's pension and provident fund arm, renewable energy firm Solaredge, and real estate developer Donitz.
