June was a tough month for the market in general and Israel stocks were hit with a double whammy: tech stocks proved they were no longer immune to the weakening economy and the shekel continued its march higher versus the dollar.

Both EIS, the iShares MSCI Israel Capped Investable Market Index Fund, and the TAV, the NETS TA-25 Index Fund, were down about 3-4% with the overall Nasdaq down about 8%.

If you look closer at the chart, you’ll see that the TAV just recently outperformed the EIS.  TEVA Pharmaceuticals (TEVA) was recently hit hard off of news of more imminent generic competition to Teva’s Copaxone (tables turned, eh?) in spite of some incrementally positive news on progress on a drug to treat Parkinsons.

We’ve written about the EIS’s extreme exposure to the generic pharma giant (weighing in at almost 25% of EIS) and this in turn, makes iShares’ Israel ETF more susceptible to fluctuations in TEVA’s stock price and ultimately, not as good a proxy for the entire Israeli market (of which TEVA constitutes less than 10% of market cap and which the TAV attempts to mimic).

Some additional reading:

• Introducing the First ‘Real’ Israel ETF
• Bulling up for some real TA-25 exposure for US Investors
• Dave Fry’s ETF Digest discusses existing Israeli ETFs

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