JERUSALEM, May 16 (Reuters) - The Tel Aviv Stock Exchange (TASE) is planning to alter its schedule and add Friday to the trading week in a bid to strengthen the Israeli bourse's global profile, it said on Thursday.

The exchange hopes a decision to shift away from Israel's Sunday to Thursday work week to one that overlaps more with Wall Street and European bourses will win inclusion in global index provider MSCI's Europe category.

The announcement comes as shares have recovered from the Oct. 7 Hamas attack on Israel that pushed the broad Tel Aviv 125 index down 12% in October. The index is now up 8% since Oct. 5, although MSCI's index of world shares has risen more than 20% over the same period.

Reassigning Israel to a new region like Europe could open the door to more passive inflows for the Israeli capital markets, but MSCI in 2022 rejected shifting the country to a new region, citing differing market trading days as a key reason.

MSCI, which provides equity, fixed income and hedge fund indexes, upgraded Israel to a developed market from an emerging one in 2010.

Under the TASE's proposal, in collaboration with the Israel Securities Authority and Bank of Israel, trading would move to either Monday through Friday or Sunday through Friday in which trading on Sundays would begin at 12.00 local time (0900 GMT).

Trading volume on Sundays is usually far lower than the rest of the week and trading ends 90 minutes earlier on that day.

It was yet to be decided how extended trading would fit around the start of Shabbat - the Jewish sabbath - on Friday afternoon when most Israeli businesses close.

The shekel currency, however, is already traded on Fridays and more services keep running during Shabbat in Tel Aviv than in most other Israeli cities.

The TASE asked that public comments on the plans be submitted by June 30.

In January, Israel's securities regulator told Reuters that Israel would eventually move to a Monday to Friday trading week in order to be included in the MSCI Europe category.

The TASE noted that currently, after trading ends in Israel on Thursday afternoon, trading on international exchanges continues for two more sessions.

"It effects on local participants and particularly on global investors, who consistently stress that the unique trading methods in Israel pose a real hindrance," the bourse said, adding that local investors remain exposed to fluctuations on those two days and can only address them on Sunday.

"Aligning TASE's trading days to global standards would help improve the accessibility of the local market to active and passive international investors and international primary dealers, which is likely to enhance liquidity in the local market," it said. "The participation of global investors in the local capital market is crucial for both local companies and the Israeli economy."

In addition to facilitating Israel's inclusion in the MSCI Europe index, the change would also mean an additional trading day for government bonds.

"The potential overall benefits could increase international activity, enhance market liquidity and enable local institutional investors to increase their activity on the local capital market, encouraging other local participants to join in," the TASE said. (Reporting by Steven Scheer; Editing by Toby Chopra)