From May 2010, the MSCI Barra world stocks index will upgrade Israel to the status of  “developed market”. Kudos indeed.

There is a down side. Some brokers hold an Israeli portfolio, because it currently represents around 13% of the European-Asia “emerging” market scene. Its anticipated weighting in its new home will be under 0.5%. A concern has been voiced that some brokers may sell initially as they consider how the new postioning impinges on their portfolios.

Despite that lag, this move is definitely an encouraging sign; a pointer in the overall confidence that the international financial community holds in Israel.

In parallel, both the Finance Ministry and the private sector will have to strive even further to continue to deserve that trust. Power plays over how to run the country’s banks or public spats surrounding the high salaries earned at the Bank of Israel are not what anybody needs to see or feel. 

The world has asked the Israeli children to move on to more sophisticated games. The country’s financial leaders must show that they are up to the challenge.