Portugal Telecom ADR delisted from the NYSE

Portugal Telecom (PT) ADR delisted from the New York Stock Exchange(NYSE) recently. With this delisting, none of the companies from Portugal trade on the U.S. Exchanges any more.

According to a filing with the SEC, PT plans to have its ADRs traded on the OTC market but details have not yet been finalized. The last date for the ADR to trade on the NYSE was today – March 30th. Here are the full details about the delisting:

The Board of Directors of Portugal Telecom, SGPS, S.A. (“PT SGPS” or the “Company”) has approved the delisting of its American Depositary Shares (“ADSs”) from the New York Stock Exchange (“NYSE”). Each ADS of PT SGPS represents one ordinary share of PT SGPS.

PT SGPS has provided written notice to the NYSE of its intent to delist its ADSs and expects to file a Form 25 with the U.S. Securities and Exchange Commission (“SEC”) on or about March 19, 2015 to effect the delisting. Unless the Form 25 is earlier withdrawn by PT SGPS, the delisting of the ADSs will be effective ten days after the filing of the Form 25. Accordingly, PT SGPS anticipates that the last day of listing of ADSs on the NYSE will be on or about March 30, 2015.

Following the delisting of the ADSs from the NYSE, PT SGPS’s ordinary shares will continue to trade on the Euronext Lisbon.

Delisting from the NYSE will consolidate trading on PT SGPS’s primary exchange, the Euronext Lisbon. In addition, PT SGPS has received a letter from the NYSE, dated February 6, 2015, giving notice that PT SGPS was below the continued listing criteria set forth in Section 802.01C of the NYSE Listed Company Manual because the average closing price of its ADSs had been less than $1.00 over a 30 consecutive trading day period. In light of these factors, and in order to achieve cost savings by eliminating the costs associated with maintaining a listing on the NYSE, PT SGPS has decided to delist the ADSs.

PT SGPS currently intends to maintain its American Depositary Receipt facility, which will enable investors to retain their ADSs and trade those ADSs in the U.S. over-the-counter market. PT SGPS has not arranged for listing and/or registration of the Company’s ADSs on another U.S. securities exchange or for quotation of the Company’s ADSs on any other quotation medium in the United States.

In addition, the Company will continue to be subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, including the requirement to file annual reports on Form 20-F and to submit reports on Form 6-K.

Source: SEC

The ADR used to trade under the ticker PT. The stock last closed at under 1$ at $0.66.

What to do if you hold PT ADRs?

Since the company continues to trade as ordinary shares on the Lisbon exchange it is possible to convert your ADRs to the ordinary shares. However the company has no allow this process and PT has not published any details on this.Similarly the depository Deutsche Bank also has no further information on this process. So it is likely that the ADRs which under $1 for a long time has become effectively worthless. You may want to write it off as a tax loss.

For the final confirmation on exactly what to do with the ADRs you hold, it may be a good idea to contact the depository or the PT investor relations whose details are listed below. As of this post, the depository has not established a listing on the OTC markets. Hence no ticker can be found.

Contact Links:

  1. Portugal Telecom Website
  2. Deutsche Bank, the depository for PT:

Contact DR Team
General Depositary Receipt Inquiries

Service Group Line
Phone: +1 212 250 9100
Email: adr@db.com
New York

Shareholder Services Contacts

General: +1 866 249 2593

Source: Deutsche Bank Depository site

 

Emerging Market Equities are Lagging Developed Market Equities

The performance of most emerging market equities in the past few years has been average to poor. Developed markets have especially performed well in the recent past handily beating their emerging market peers. The BRICs used to the hot destination for many years. However collectively they have disappointed investors with the exception of India.

Compared to the double digit returns of most European markets and the decent performance of the U.S. markets so this year, emerging markets are still lagging. The following chart shows the 5-year returns of the MSCI Emerging Markets Index and the EAFE Index:

Click to enlarge

MSCI EM vs EMEA Index-5 Years

Source: MSCI

The chart shows that emerging markets have been under-performing developed markets since 2013. The gap between the performance of developed stocks and emerging stocks continue to widen.

The iShares MSCI Emerging Markets ETF (EEM) was down about 3% in both 2013 and 2014.

Despite the poor performance of emerging stocks, it is not a good idea to completely write them off. There are still opportunities to be found in those markets although one has to very selective. Certain sectors such as real estate, technology, consumer discretionary can be avoided. And investors can consider stocks in the consumer staples, utilities, banking and retail sectors. This is as consumers in developing countries move from lower-income to middle-income levels they spend their disposable income buying products and services from companies operating in these sectors.

Five emerging market companies that investors can consider are listed below:

1.Company:Vina Concha y Toro SA (VCO)
Sector:Beverages
Country: Chile

2.Company: ICICI Bank Ltd(IBN)
Sector: Banking
Country: India

3.Company: Fomento Economico Mexicano SAB de CV (FMX)
Sector: Beverages (Nonalcoholic)
Country: Mexico

4.Company: Turkcell Iletisim Hizmetleri AS (TKC)
Sector: Mobile Telecom
Country: Turkey

5.Company: Companhia Brasileira de Distribuicao (CBD)
Sector: Food & Staples Retailing
Country: Brazil

Disclosure: No Positions

Historical U.S. 10 Year Treasury Yield Chart

The current yield on the U.S. 10 year Treasury note is 1.96%. In the past five years, the yield has dropped from about 4% to about 2% recently. In the past, U.S. Treasuries have yielded excellent cumulative returns during certain periods.

The following chart shows the historical yield on the U.S. 10-year Treasury from 1954 thru 2014:

Click to enlarge

Historical U.S. Treasury Yield Chart

Source: Global Market Insights – Inefficiencies and opportunities in today’s fixed-income markets, Deutsche Asset & Wealth Management

The yield rate peaked in the 1980s when it reached over 14%. Since then it has followed a long-term downward trend.

With the yield treasuries so low its no wonder investors are putting more money into U.S. equities. There are plenty of equity opportunities which have dividend yields of well over 2%. Of course, equities are not the same U.S. Treasuries but still there is a reason investors are attracted to high-quality dividend stocks these days.

Why Foreign Stocks Are Still A Buy

International equities are leading U.S. stocks this year. For example, developed European markets are well ahead of American stocks at least so far this year. The year-to-date returns of some of the major equity markets are listed below:

S&P 500 Index: 2.39%
Canada’s S & P/TSX Composite: 2.1%
UK’s FTSE 100: 7.0%
France’s CAC 40: 19.1%
Germany’s DAX Index: 22.8%
Spain’s IBEX35 Index: 11.1%
China’s Shanghai Composite: 11.8%
India’s Bombay Sensex: 2.8%
Brzail’s Sao Paulo Bovespa: 3.9%

Data Source: WSJ

With major European markets such as Germany trouncing the U.S. this year, some investors may be wondering if foreign stocks are still attractive at current levels. Fundamentals show that foreign stocks have still room to run. Developed stocks especially are attractive even after the current run up. I came across an interesting article by David L. Ruff, CFA of Forward Management in which he lays out the arguments in favor of international stocks. From the article:

International equities are attractive now
Historical trends unfortunately don’t reveal much about exactly when international equities may once again outperform, but a variety of metrics, including yields, valuations and earnings, reveal international stocks to be attractive in the current climate regardless of their relation to U.S. equities. As shown in the chart below, dividend yields are higher abroad. Valuations also favor non-U.S. equities, with foreign markets trading at 45% to 50% discounts on a price-book basis. While profitability favors the U.S., non-U.S. returns on equity are also attractive. Earnings growth for Europe and Japan has overtaken the U.S. due to weakening in their currencies and lower oil prices will help foreign markets with greater hydrocarbon/commodity import exposure. These metrics highlight that it is unnecessary and even unfavorable to wait for outperformance as great opportunities exist in international equity markets right now.

Key Metrics: U.S. vs. Non-U.S.

Country Dividend Yield 3-Year Dividend Growth Rate Price- Book Price-Earnings Enterprise Value/ EBITDA Latest Earnings Growth5 Return on Equity
U.S.1 2.02% 18.8% 2.7x 17.6x 11.1x 7.4% 23.1%
Non-U.S.2 3.19% 16.5% 1.5x 15.0x 8.4x 4.9% 17.3%
Non-U.S. Developed3 3.33% 15.6% 1.5x 16.2x 8.7x 17.2% 16.8%
Emerging Markets4 2.67% 20.6% 1.4x 12.1x 7.5x -7.2% 18.3%
Sources: Morningstar, HFR and Forward, as of 01/15/14
Past performance does not guarantee future results.1 Based on iShares S&P 500 Index data
2 Based on iShares MSCI ACWI World ex-USA Index data
3 Based on iShares MSCI EAFE Index data
4 Based on iShares MSCI Emerging Markets Index data
5 Latest earnings seasons quarterly earnings year-over-year growth, 10/15/14-01/15/15
Source: Don’t Stop Believing: The Case for International Equities, Mar 12, 2015, Forward Management LLC

Investors willing to wait for five years or more can consider adding developed equities at current levels though additions in smaller chunks is better than a single investment.

Five stocks from developed countries in the MSCI EAFE Index are listed below for further research and potential investment:

1.Company: Singapore Telecom (SGAPY)
Current Dividend Yield: 4.20%
Sector: Telecom
Country: Singapore

2.Company: Westpac Banking Corp (WBK)
Current Dividend Yield: 5.12%
Sector:Banking
Country: Australia

3.Company: Enbridge Inc. (ENB)
Current Dividend Yield: 3.04%
Sector: Oil & Gas
Country: Canada

4.Company: Cathay Pacific Airways Ltd (CPCAY)
Current Dividend Yield: 1.48%
Sector: Airline
Country: Hong Kong

5.Company: Rogers Communications Inc (RCI)
Current Dividend Yield: 4.34%
Sector: Telecom
Country: Canada

Note: Dividend yields noted above are as of Mar 20, 2015. Data is known to be accurate from sources used.Please use your own due diligence before making any investment decisions.

Disclosure: No Positions