Citigroup and Bank of NY-Mellon released a semi-annual reports on the Depositary Receipts market in which these big players highlighted
» The number of available DR programs globallly rose to 3,214 from 3,096 a year ago, from 76 different countries.
» Depositary Receipts H1 trading volumes rose 6% to 79.3 bn shares, versus 74.5 bn in H1 2009. Trading value rose by $547 bn or 4.3% to $1.8 trillion as of June 30.
» Capital raisings increased 133% to $3 billion; IPOs continued to rebound from 2009 levels and accounted for 54% of total H1 capital raising. Almost all the IPOs were from BRIC countries, except for Brazil.
» While 90% of US trading was in listed ADRs on the big board and the Nasdaq, the depositaries mainly created new unsponsored Depositary Receipts listed over the counter. Only one sponsored ADR, for Britvic, was not listed on an exchange. Companies sponsoring previously unsponsored ADRs included Denmark’s Carlsberg and Japan’s Takeda Pharmaceutical.
» Following the US 2008 rule change, 951 new unsponsored ADR programs were established, 79 of them in H1 of this year. There had been only 177 unsponsored ADR programs when the SEC reopened the market. The total now is therefore 1128 programs run by Citi, JPMorgan Chase, Deutsche Bank, and the leader, Bank of NY-Mellon. Nine programs are Global Depositary Receipts mainly traded in London, not in the USA. Citi’s proprietary data shows that market cap of unsponsored DR programs rose 19% year over year mostly from French, Chinese, German, and Australian DR programs, while those from Denmark and Japan declined. BNY-Mellon acted as structural advisor for the future Indian depositary receipt program.
» British DR trading rose sharply because of BP which accounted for 3.8 bn ADRs traded in H1 this year vs 979 mn in H1 2009 and 442 mn in H1 2008 according to Citi.
» Total U.S. investment in non-US equities in Q1 2010 was $4.2 trillion, up 63% from Q1 2009. Data for Q2 are not yet compiled.
*Citi’s “Liquid DR Index” underperformed the S&P 500 in H1. Please do compare this with the www.Global-Investing.com portfolio’s performance on closed positions which is public.
Dow Jones reports that Baring Private Equity Asia, an independent fund manager, is raising $1.75 bn for a new Asia-focused fund. Asia appears to analysts to offer an opportunity for bigger returns in the coming months. PriceWaterhouse wrote recently that initial public offerings in mainland China will raise over $73.8 b in H2. .
Hong Kong-based Baring Private Equity Asia closed its previous fund, a $1.52 bn investment fund in May 2008. While the fund is mainly focussed on China, it has also been active in India (explained for paid subscribers below.). The fund also bought in Japan and southeast Asian countries.
Previous funds invested in alternative energy, media and financial services. It also went into sectors the Chinese govt. favored like services. Baring Private Equity Asia was originally part of ING Groep NV but was bought out by management in 2000. Apart from British, US, and Canadian pension plans, Baring has won investments from Goldman Sachs which presumably has enough money in its kitty (despite the $550 mn record civil fraud settlement with the SEC over CDOs being missold) to invest in the new round…Baring can buy on stock markets or by private placements or buyouts.
*Baring’s India portfolio for its last fund was built up starting in 2007 with help from ICICI Ventures, a sub of ICICI Bank, IBN. Together they bought Karvy, an Indian stockbroker, for $44 mn. R.P. Singh, Indian Industry Secretary, determined that IBN should not be handicapped because of foreign shareholding, since it is incorporated in India. However other parts of the babu bureaucracy disagree.
*Martin Ferera writes about Intertek:
Its larger Swiss rival, Societe Generale de Surveillance had slightly disappointing results but reported that H2 will improve over H1. SGS said it’s seeking ‘accretive acquisitions’ but dismissed any tie-up with IKTSF.
Intertek reports H1 results Aug. 2. Another rival, France’s Bureau Veritas, acquired Inspectorate at a pricy 18 EBIT ratio. M&A in the testing sector shows better confidence and cash flow. Some speculate that Intertek’s aborted takeover of business lines from the not-for-profit Det Norske Veritas of Norway may be back on at 12-14x EBIT, which looked expensive then but seems attractive now.
Investors increasingly have to turn to emerging markets for growth, a big positive for IKTSF where 36% of sales are booked there, and where its markets are growing. Intertek is expected to grow EPS by 16% and 12% over next two years. These factors explain Intertek’s recent share price appreciation and why Merrill Lynch made IKTSF its preferred play testing. Merrill says Intertek is trading at a prospective P/E of 13.5, slightly below its historic average.
He adds: “G4S (GFSZY) emerging markets exposure is at 26% and the aviation security and services firm also has a decent prospective growth of just under 10% and prospective p/e of 10.” I bought more IKTSF this week.
*The board of Portugal Telephone will into overtime (presumably to break a tie) starting their meeting at 5 p.m. Portuguese time on the bid for its half of Brasilcel, the company controlling Vivo of Brazil which Telefonica wants very much to buy. So we may have to hold on over the weekend before learning the outcome. We like PT for its 7% yield regardless of the Spanish.
*Stallergènes reported sales (but not profits, to be reported only Aug. 26) for H1 up 13% to euros 110.6 mn. The French maker of allergy products saw a pick up of sales by 14% in Q2 and a rise in subligual desensitising ones by 16%, to over 36% of total sales. Oralaire, against grass allergies, is doing particularly well in Germany and succeeded in tests in the USA. It will be launched in the Netherlands, Czech Republic, Slovakia, and Austria later this year.
Staloral, a sublingual treatment for mite allergies and mild asthma is succeeding in Phase III trials in China and another asthma regimen is also being planned there, for Actair.
STLEF expects profits to come in higher than last H1 despite the financial crisis and says 2010 sales will be up 10%, margins higher because of level spending on research and development, and more profits.
*Galapagos NV (of Belgium) and the University of Bristol announced a new drug discovery collaboration to develop a new analgesic drug based on the protein glanain for treating chronic diabetes pain (diabetic neuropathic pain). GLPGY’s BioFocus division will provide hit-to-lead and lead optimization services for a Wellcome Trust-funded program at the UK university. Total contract value for Galapagos could exceed €3.3 mn in research fees over two years. Galanin is a small protein which was shown to reduce neurpathic pain in models of different diseases, including diabetes.
*Deep vein thrombosis drug Arixtra from GlaxoSmithKline faces a global generic challenge by Dr. Reddy’s. The Indian firm will buy from Australia’s Alchemia fondaparinux sodium for injection (the generic version of GlaxoSmithKlines jab)for all territories outside of North America. They already have an earlier deal for North America. The amount of royalty to be paid was not released. RDY may wind up selling the drug thru third parties. GSK and RDY are both in the model portfolio.
A potential threat to GSK’s OTC obesity drug Alli was Vivus’ more risky prescription drug combo (Qnexa) which was rejected by the SEC’s advisory panel yesterday because it may have psychiatric or cognitative side-effects to say nothing of causing birth defects. Fat-fighting is not easy. This news should keep the GSK buying panic going another day.
*Aberdeen Global Income Fund (FCO) has been nibbling at Asian emerging markets. FCO has now 3.2% of its assets in Indonesian government and private sector bonds, 90% of the lot dollar denominated. It has 2% of its assets in Philippine debt, all in dollars, and 82% issued by the Manila govt. And it put 1.1% of assets into Kazakhstan bank $ bonds.
*Over at Bank of Nova Scotia, Scotiabank (BNS) , there have been Q2 investments in Thai banking. BNS’s 49% sub Thanachart Bank acquired 48% of Siam City Bank and then merged with it. Canada’s BNS put about C$650 mn into Thanachart to maintain its 49% stake. The combo is now the 3rd largest bank in Bangkok and the 5th cor Thailand as a whole. The deal, according to Michael Goldberg of Desjardins Securities, is “accretive to earnings.” Current yield is over 4%.
Both FCO and BNS got their feet wet in Latin American emerging markets. BNS picked up another Latin, R-G Premier Bank, last quarter, from the FDIC, in Puerto Rico, USA. According to Mr. Goldberg, this gives it critical mass with a 10% market share. We own BNS for its Latin America prowess but Thailand and Puerto Rico are fine.
*Ascendas India Trust Units, run from and listed in Singapore, invests in real estate in India and yields 7.90%. ACNDF is the ADR.
*With a drop in 2009 sales of 60% and a drop in EPS from 48 cents/sh to 2 cents, be grateful we bailed out of WSH Holdings, WH, Chinese maker of drilling pipe for oil and gas exploration. WH confronted both US “anti-dumping” protectionism and Chinese price-controls as oil prices cratered and steel prices rose, leading to hugely mounting debt by the Chinese firm to carry its remaining non-US customers domestically and in the Stans.
Vivian plans to stick with SLB (Dutch Schlumberger which is really French) and RIG (Swiss Transocean which is really American) in the oil exploration business, having also sold TS (Luxembourgeois Tenaris which is really Italo-Argentine.).Exploration service firms are very international apart from WH.
*After at least two readers bought round lots of Sued-Chemie your editor finally bought her miserable 25 in Frankfurt (am Main) yesterday at 2 a.m EST. I paid euros 98.5 and the SUC share closed at 102.5. One reader used a specialized US brokerage and the other Baloise Bank in Switzerland. I used my HSBC account but it required persistence.
I looked into a Basel legal offshore account but there are difficulties. If you are able to read German and are interested, here was their reply (which was accompanied by an incomprehensible English translation):
Der Sachverhalt ist leider etwas kompliziert. Geschäftsbeziehungen von amerikanischen Staatsbürgern sind gewissen Auflagen untergeordnet. Ich komme nicht darum herum, ein paar Fragen an Sie zu stellen.
1. Sind die anzulegenden Gelder deklariert (versteuern Sie diese)? (Wir benötigen eine Kopie der Steuererklärung).
2. Handelt es sich bei der Anlage um eine Summe, die CHF 250’000.00 übersteigt (heute ca. USD 240’000.00)
3. Wie stellen Sie sich die Anlage der Gelder vor? Wollen Sie diese selber vornehmen und per E-Mail kontakt aufnehmen oder wollen Sie eine Fremdverwaltung? (Fremdverwaltung wäre durch die Bank; E-Mail-Kontakte gelten nicht als sicher, Sie tragen im E-Mail-Verkehr ein Risiko.)
4. Eine Identifizierung Ihrer Person ist notwendig. Können Sie in der Schweiz vorbeikommen (sind Sie möglicherweise bei uns in den Ferien) oder können Sie uns eine Appostille für Ihren Ausweis zusenden?
Die ersten beiden Fragen sind dringend mit “Ja” zu beantworten. Bei Frage 3 ist die künftige Kommunikation zu berücksichtigen, bei Frage 4 ist der Aufwand der Beschaffung der korrekten Daten relevant. Bedenken Sie, dass eine Kontoeröffnung mit Originalbelegen auf dem Korrespondenzweg gewisse Zeit in Anspruch nimmt.
Ich hoffe, Sie können mit den erwähnten Bedingungen/Auflagen zurechtkommen. Dann steht einer Kontoführung meines Erachtens nichts im Wege.
My responses were 1) ja 2) nein 3) e-mail 4) no Swiss vacation plans short term. The paperwork is comparable to what was sought by boom.com (in Hong Kong) which another reader introduced me to. At least boom.com is cheap, English-speaking, and electronic, more than can be said for the Swiss.