How Big is the Energy Sector in Select Equity Markets?

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The energy sector comprising mostly the oil industry is a major sector of the economy in certain markets than others. For example, in many emerging markets the oil companies dominate the economy. Firms such as Petronas of Malaysia, Statoil of Norway, Lukoil and others of Russia, etc. dominate the respective local economies in terms of revenue and earnings.

According to a report by Deutsche Bank, investors in 2015 have to consider the importance of energy sector to a market index when making their decisions. The following chart the share of the energy sector in the local stock market’s benchmark index:

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Energy Sector Share in Local Market Index

Source: CIO View Special, Feb 2015, Deutsche Asset & Wealth Management

From the report:

Since the major stock indices overweigh the energy sector compared to its economic significance, a lower oil price can result in lower aggregate index gains, even in an environment of GDP growth. Every oil-price decline by $10/b is likely to lower S&P 500 Index and STOXX Europe 600 Index gains by 1%.

The benchmark indices of Russia and Norway have very high concentration of the energy sector. Some of the large Russian oil firms include LUKOIL (LUKOY), Gazprom (OGZPY) and Rosneft Oil Company (OJSCY). Norway’s Statoil (STO) is the largest oil firm in the country and is also a major global player in the industry. Though the price of Statoil ADR has fallen to about $19 now due to collapse of oil prices, still the firm has a respectable market cap of about $60.0 billion. Brazil’s Petrobras (PBR) has become a fallen angel due to the corruption scandal but seems to be on the mend this year.The ADR has nicely jumped from under $5 a share recently to close at $7.75 yesterday.

The U.S. economy is highly diversified and the S&P 500 reflects that. The energy industry accounts for just 8% of the index as the graph shows below:

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SP500 Sector Breakdown2

Source: S&P

Since the S&P 500 highly diversified the index has not tanked heavily despite the dramatic plunge in oil prices in the past few months.

The key takeaway for investors from this post is that the equity markets of countries with high oil industry concentration will be affected by the movement of oil prices. For instance, the Russian economy and the RTS index will bounce sharply should oil prices recover strongly this year.

Disclosure: Long PBR

A Look at SPDR EURO STOXX 50 ETF

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The SPDR® EURO STOXX 50® ETF (FEZ) gives exposure to some of the largest firms in the Euro zone which excludes the UK and Scandinavian countries in Europe. Investors looking to allocate a portion of their portfolio’s assets to large-cap European firms in the Euro region can consider this ETF.

The fund objective is as follows:

The SPDR® EURO STOXX 50® ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the EURO STOXX 50® Index.

The fund is large with a respectable asset base of $4.9 billion. The expense ratio is just 0.29% and the dividend yield is 3.35%.

In terms of returns, FEZ is up 6.54% year-to-date as of the month-ending in March.

The fund has 57 holdings. The top 10 holdings are:

Bayer AG
Sanofi
Total SA
Banco Santander S.A.
Anheuser-Busch InBev SA
Daimler AG
BASF SE
Siemens AG
Allianz SE
BNP Paribas SA Class A

The complete list of stocks in this ETF can be found here. This list can also be used as a starting point for investors hunting for high-quality European companies.

Source: SPDR

Disclosure: No Positions

The Top Metropolitan Areas with High H1-B Visa Approvals

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Every year highly-skilled foreign workers compete to enter the U.S. via the H1-B visa program. April 1st week is the H1B visa cap season. Currently this program has a cap of 85,000 per year. In the past few years, the demand for these visas has far exceeded the supply. Hence a lottery has been designed if the number applications filed exceeds the 85K limit in the first week of April. Both companies and workers alike clamor for this highly coveted visas.

The following table shows the top metropolitan regions with high H1-B visa approvals based on 2013 data:

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2015 H-1B opening day metro supply Tables.xlsx

Source: The H-1B visa race continues: Which regions received the most?, The Brookings Institution

Traditionally the largest number of H1B visas have gone to applicants from India, China and Canada in that order. Indians receive the highest percentage of available H1B visas due to their dominance in IT industry. Canada also ranks in the top since the country is a commodity-based economy and high-tech industries are practically insignificant compared to the U.S. So many Canadians looking to work in the IT or high-tech industries move to the South of the border to excel in their careers.

It should also be noted that beginning this May the spouses of H1B visa holders will also be allowed to work legally in the country. Hence the 85K cap limit will actually lead to more than 100K or more jobs going to H1B visa holders and their spouses.

Knowledge is Power: Chile, Active vs. Passive, Latin America Edition

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US Capitol

U.S. Capitol, Washington D.C.

Portugal Telecom ADR delisted from the NYSE

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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: [email protected]
New York

Shareholder Services Contacts

General: +1 866 249 2593

Source: Deutsche Bank Depository site

Update – 4/6/15:

Currently Portugal Telecom trades on the OTC market under the ticker PTGCY.