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What Glaxo’s India offer says about EM affiliates

Any investor familiar with emerging markets will be aware that often find partly-owned subsidiaries and affiliates of major multinationals with their own listing on the local stock exchanges. For example, Unilever has listed divisions in India, Indonesia and Pakistan, while Wal-Mart owns Wal-Mex (Mexico) and Massmart (South Africa)

The reasons why these subsidiaries are publicly traded varies, although it sometimes reflects local rules that at some point prohibited foreign companies from being the sole owner of a local company. Where these rules have changed, the local listings can often look like an anachronism today, especially given that many of them are lightly traded.

So one might expect the shareholders in the stocks to jump at the parent multinational’s offer to buy them out at a premium. Which makes it interesting to see what’s going on with GlaxoSmithKline’s bid to increase its stake in its Indian affiliate, GlaxoSmithKline Consumer Healthcare.

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New EM Exposed index from Stoxx

Index provider Stoxx announced an interesting new benchmark – the Stoxx Global 1800 EM Exposed Index. In brief, this is a sub-index of its Stoxx 1800 Global Index (which holds 1,800 developed world stocks) focusing on companies that get a substantial portion (at least 33%) of their revenues from emerging markets.

The press release [PDF] has a bit more detail, as does the index data page on the Stoxx site (although there isn’t much data up yet). Conceptually, this is pretty similar to the Russell Geographic Exposure Index series launched in September.

In both cases, the idea is that you can get exposure to EM growth through developed world stocks that offer better liquidity, corporate governance and other desirable factors. It’s a fairly popular theme and with two related indices launched in the last few months there’s a good chance that we will see an exchange-traded fund based on it sooner or later.