Chicago, IL – November 12, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Vodafone Group Plc (VOD), Telefonica (TEF), Deutsche Telekom (DT), France Telecom (FTE) and Verizon (VZ).

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Here are highlights from Wednesday’s Analyst Blog:

Vodafone Profit Leaps, Lifts Savings

Vodafone Group Plc (VOD), the largest wireless carrier in the world by revenue, has announced interim results for fiscal year 2010 with adjusted net income of £4.58 billion (US$7.3 billion) increasing 15% year over year from £3.99 billion (US$6.4 billion) reported a year ago, driven by favorable exchange rate movements and reduced tax. Adjusted earnings exclude one-time items such as impairment losses.

The telecom giant reported consolidated revenues of £21.8 billion (US$34.8 billion) for the period, representing a 9.3% year over year growth. Favorable exchange rate (euro-sterling) swings and net impact of merger and acquisition initiatives contributed to this growth. Excluding these impacts (organic basis), revenue declined 3% year over year.

Group service revenue declined 2.6% year over year on an organic basis to £20.5 billion (US$32.7 billion), primarily due to weaker contributions from European markets as recessionary conditions curbed demand for wireless services. Adjusted EBITDA increased 2.9% year over year to £7.5 billion (US$12 billion) driven by cost control.

Revenues for the European segment increased 3% year over year (down 5.1% on organic basis) to £14.9 billion (US$23.8 billion). Service revenue in Europe declined 4.5% organically as growth in Italy and the Netherlands was more than offset by decreases across Spain, Germany and the UK due to a weaker economy, regulatory pressure and intense competition.

Decline in voice revenue continues to offset growth in data. Revenue in Germany and the UK remains under pressure due to mobile termination rate (inter-operator fees) cuts. Vodafone is also losing customers in the UK as subscribers switch to its major rival Telefonica’s (TEF) O2 which is marketing iPhone in the UK.

Moreover, Deutsche Telekom (DT) and France Telecom (FTE) have recently finalized an agreement to combine their UK units, which will create the largest mobile carrier in the UK.

This segment posted revenues of £3.7 billion (US$5.9 billion), up 36% year over year. Organically, service revenue fell 3.2% as consistent growth at Vodacom (South Africa) and increase in subscriber count were partly offset by weak contributions from Romania and Turkey. Service revenue at Vodacom increased 4.2% on an organic basis as a result of healthy subscriber accretion.

Asia Pacific & Middle East segment continues to perform in line with expectation. Revenue surged 15.9% year over year (11.3% organically) to £3.1 billion (US$4.9 billion), driven by continued strong growth in India , the single biggest contributor to organic revenue growth. Service revenue in India increased 20.5% organically boosted by roughly 55% growth in wireless customer base amid intense price competition.

During the six-month period, Vodafone registered roughly 20.6 million net new mobile connections across its operations, bringing the total subscriber base to 323.3 million (83.5% represented by prepaid). India continues to be a key driver for subscriber growth with a net addition of 14 million customers in the first six months of fiscal 2010.

In Europe, the company registered a net loss of 262,000 subscribers during the half-year period. Verizon’s (VZ) mobile unit, Verizon Wireless, in which Vodafone holds a 45% stake, however, posted a net addition of 1.1 million customers.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Chicago, IL – November 10, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Freeport-McMoRan (FCX), Barrick Gold Corp. (ABX), Deutsche Telekom (DT), AT&T (T) and Verizon (VZ).

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Here are highlights from Monday’s Analyst Blog:

No Inflation Problem

How, then, does one explain the recent move in the price of gold to over $1,100 an ounce? Historically, gold has been seen as the ultimate inflation hedge. Its rise over the past year to record nominal levels (it would have to roughly double to match its inflation-adjusted high’s set back in 1979) would seem to indicate that the market is afraid of inflation. How do we square this with data from the TIPS market, which indicates the market sees no real problem with inflation?

One reason might be the rise of India, although that would not explain the day-to-day moves. Historically and culturally, Indian’s have a far higher propensity to store their wealth in the form of gold, specifically in jewelry, not bullion, than the rest of the world does. That said, I don’t think that the 200 metric tons recently bought by the Reserve Bank of India is about to be turned into necklaces and earrings anytime soon.

Still, as millions and millions of Indians become more middle class, the demand for gold has gone up. To a lesser extent, this holds true for China as well. Even more Chinese are becoming wealthy or at least middle class than are Indians, although the cultural propensity to hold gold is not quite as strong.

Part of it might just be that we have not found that many new gold mines recently, and the ore grades in places like South Africa have been going down. That, combined with rising demand, is a classic recipe for rising prices -- even if people are not expecting a return of 1970’s-style inflation.

Total world gold production has been falling over the last five years following steady growth in the over 20 years preceding that. That would mean good things for the gold miners who have large reserves of gold in the ground, especially if they are able to increase production when the rest of the world is seeing production decline. Freeport-McMoRan (FCX) and Barrick Gold Corp. (ABX) are good examples of such companies.

DT Tops Estimates on Cost-Cutting

German telecom giant Deutsche Telekom (DT) announced results for third-quarter 2009 with reported earnings per ADS of 31 cents, beating the Zacks Consensus Estimate of 25 cents. Net income of €959 million (US$1.4 billion) reflects a 7.2% increase from €895 million (US$1.3 billion) reported a year ago.

This year-over-year growth was fueled by the company’s ongoing cost-cutting initiatives under the "Save for Service" program. Total savings from this program reached approximately €5.4 billion (US$7.7 billion) at the end of the quarter, exceeding the annual savings target of up to €4.7 billion (US$6.7 billion) originally expected to be achieved in 2010.

Revenue at Mobile Communication USA (T-Mobile USA), the fourth-largest US wireless carrier, grew 3% year over year to €3.8 billion (US$5.4 billion). However, in dollar terms, total revenue for the quarter represents a 2.3% annualized decline. Net income (measured in dollars) also decreased 5.7% year over year to US$417 million.

Blended ARPU for T-Mobile USA was US$47, down from US$52 and US$48 reported in the prior-year quarter and previous quarter, respectively, as growth in data services was offset by lower roaming and customer migration to unlimited plans. Blended churn (customers switching to other products) increased sequentially and year over year to 3.4% as a result of an increase in contract churn due to intense competition.

Higher contract churn affected customer retention at T-Mobile USA in the third quarter, as evidenced by a net loss of 77,000 customers. This is compared to a net gain of 325,000 and 670,000 customers in the previous and year-ago quarters, respectively.

T-Mobile USA remains challenged by the cutting-edge wireless handsets offerings from its larger peers such as AT&T (T) and Verizon (VZ), resulting in increased customer defection. The entity served 33.4 million mobile subscribers at the end of the quarter.

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Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Chicago, IL – September 16, 2009 – Zacks Equity Research highlights Joy Global (JOYG) as the Bull of the Day and Zions Bancorporation (ZION) the Bear of the Day. In addition, Zacks Equity Research provides analysis on Fannie (FNM), Freddie (FRE) and J.P. Morgan (JPM).

Full analysis of all these stocks is available at http://at.zacks.com/?id=2676

Here is a synopsis of all five stocks:

Bull of the Day:

We are confident about the long-term fundamentals of the mining industry, which is further supported by a sustainable secular shift in commodity demand in the emerging economies. This will provide Joy Global (JOYG) substantial growth potential once the global economy emerges from the ongoing turmoil.

Joy Global aims at maximizing operating efficiency and useful life of mining equipment through value-added aftermarket services, which gives the company significant edge over its competitors. Additionally, the stable revenue stream from the high-margin aftermarket operations help Joy Global offset its cyclical original equipment business.

Of late, Joy Global management has implemented several strategies to optimize cost-structure and realign production capacity to cope with the slowing customer orders and stay competitive amid the ongoing global slowdown. The company is pushing its overall inventory and working capital efficiency. Moreover, Joy Global is looking at increasingly relocating production capacity to low-cost regions like China, Poland, and South Africa. These actions will improve operational efficiency, boost profitability and also solidify long term viability of the company.

Bear of the Day:

Given the high competitive pressures in the banking industry, we expect continuous deposit pricing pressures as well as growth in higher cost funding accounts to weigh on Zions Bancorporation's (ZION) net interest margins (NIM), creating headwinds on the revenue front.

Loan growth has remained solid, but slowing growth in core deposits could cause a negative mix shift, another setback for the NIM. Management expects deposit growth to continue to lag loan growth and that a portion of future loan growth may be funded from alternative higher cost funding sources.

The growth through acquisition model exposes the company to the risk of overpaying for targets. We are concerned about Zions commercial real estate (CRE) exposure. CRE represents over one-third of Zions overall loan portfolio. Continued weakness in the residential development and construction activity in the southwest has resulted in further deterioration of credit metrics in the past several quarters. Given the sluggish economic conditions, we expect credit to further deteriorate across the industry in the coming quarters.

Latest Posts on the Zacks Analyst Blog:

Obama and Market Regulation

Some of the proposals that President Obama has made sound reasonable and possibly workable, but the real devil is in the details. He will attempt to solve the 'too big to fail' problem by requiring the bigger, TBTF banks to hold higher levels of capital than smaller non-systemically important banks. The big question is how much higher?

If it is only a nominal difference, then the big banks will be in a great position. The Federal government will be in effect guaranteeing the debt of those banks (just like it did for Fannie (FNM) and Freddie (FRE) before taking them over). This will result in a much lower cost of capital for a TBTF bank like J.P. Morgan (JPM) than for your average mid sized bank. The big banks will then be free to take the money and pile it all on 23 red on the roulette wheel (metaphorically). If they win, the bank makes a fortune, which it will then share generously with its top executives. If they lose, the taxpayers will pick up the tab if the amount lost exceeds the bank's capital. Debt obligations of the big banks will be almost as safe as treasuries.

Get the full analysis of all these stocks by going to http://at.zacks.com/?id=5507.

About the Bull and Bear of the Day

Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.

About the Analyst Blog

Updated throughout every trading day, the Analyst Blog provides analysis from Zacks Equity Research about the latest news and events impacting stocks and the financial markets.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=5508.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5509.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
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312-265-9380
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Chicago, IL – September 16, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Hewlett Packard Co. (HPQ), Dell Inc. (DELL), Sasol Ltd. (SSL), AT&T (T) and Centennial Communications (CYCL).

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Here are highlights from Tuesday’s Analyst Blog:

HP: Notebook Follows Printers

Hewlett Packard Co. (HPQ) has now taken up the task of enhancing its notebook product line. The company has come up with new advanced gadgets in this segment.

Technology research firm IDC projects that the light-weight notebook market is expected to grow in the next few years, so HP is launching new notebooks at the right time to encash on this opportunity. Moreover, we believe, this is Hewlett-Packard's answer to the newly launched, "Inspiration Z" laptops by competitor Dell Inc. (DELL).

Sasol Beats, Guides Lower

Sasol Ltd. (SSL) reported better-than-expected results for the fiscal year ended June 30, 2009, aided by robust performance from the company's energy businesses, partly offset by weak chemical operations. The South Africa-based petrochemicals group reported headline earnings per share, excluding one-time items, of R25.3 ($3.40), beating the Zacks Consensus Estimate of $3.00.

However, on a year-over-year basis, Sasol's adjusted earnings per share fell 33%, hurt by lower oil and chemical product prices, partially offset by a weaker Rand/U.S. dollar exchange rate. Operating profit declined more than 27% to R24.7 billion.

AT&T Defers CYCL Deal

AT&T (T) has further delayed its acquisition of regional telecom operator Centennial Communications (CYCL) which is now expected to conclude in fourth-quarter 2009. The acquisition was originally set to close by second-quarter 2009 but was delayed to third-quarter 2009 in July 2009. The deal is pending regulatory clearances of the Department of Justice and Federal Communications Commission and other closing conditions.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
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312-265-9380
Visit: www.zacks.com

Joy Global aims at maximizing operating efficiency and useful life of mining equipment through value-added aftermarket services, which gives the company significant edge over its competitors. Additionally, the stable revenue stream from the high-margin aftermarket operations help Joy Global offset its cyclical original equipment business.

Of late, Joy Global management has implemented several strategies to optimize cost-structure and realign production capacity to cope with the slowing customer orders and stay competitive amid the ongoing global slowdown. The company is pushing its overall inventory and working capital efficiency. Moreover, Joy Global is looking at increasingly relocating production capacity to low-cost regions like China, Poland, and South Africa. These actions will improve operational efficiency, boost profitability and also solidify long term viability of the company.

Joy Global has a strong balance sheet and a solid cash flow generating profile. The capex requirements should be reduced markedly when the company completes its ongoing projects. As of July 31, 2009, Joy Global had $266.6 million in cash and $243.3 million in available credit line; debt-to-capital was 38%. It has a favorable debt maturity schedule with the bulk of its long-term debt obligations falling due after 2015.

We see Joy Global shares performing above the broader market going forward and as such recommend it as Outperform.Zacks Investment Research

Harmony reported earnings of 29 cents per share for the fiscal fourth quarter, higher than 17 cents in the previous quarter, helped by sales of less-profitable assets, staff cuts and lower debt resulting in lower interest expenses. Revenues increased by $15.8 billion driven by a stronger gold price. Gold production increased sequentially, although by a modest 1.1% from 10,880 kg to 11,003 kg.

Harmony plans to increase production by more than 40% to about 2.2 million ounces a year by 2012, from the present 1.55 million. The company is also looking to acquire the assets of Pamodzi Gold Ltd. in Free State, South Africa for $3.4 billion.

However, Harmony is affected by the strength of the rand as its expenses are denominated in the local currency while sales are denominated in dollars. The company’s net profit fell 76% last quarter to R238 million as the South African currency rallied against the dollar.

More so, Harmony has been battling to restore credibility since the resignations of its Chief Executive Officer and Financial Director in 2007, which resulted in a quarterly cost of about $2.08 billion related to final compensation.

We believe Harmony needs to focus on cost reduction. The company has recently agreed on salary increases of between 9 and 10.5%. Harmony’s power supplier, Eskom Holdings Ltd. has also increased its tariff by 31%. These cost increases are expected to have an impact on Harmony’s earnings in the near term.

Chicago, IL – August 26, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Microsoft (MSFT), Yahoo (YHOO), Google (GOOG), Nokia (NOK) and Research In Motion (RIMM).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

Microsoft Doing Everything Right

When I read the first article about the Microsoft (MSFT)/ Yahoo (YHOO) combo, I did not fully realize how it would change my search experience. But when I checked my Yahoo mail this morning, I was pleasantly surprised to see a Bing bar at the top. One of the things that crossed my mind was how could a regular Googler like me be enticed into using Bing?

It now appears that I have to do nothing, I just open a Yahoo finance/mail/or any other Yahoo page and there it is. But would I still continue using Google (GOOG)? I think not, especially if Google is not my home page and the content is more or less the same. This basically means that the focus has now shifted from use to content.

Microsoft has also introduced a freely downloadable version of MS Office, facilitating the use of the company’s word processing, spread sheet and PowerPoint products. Although Google already offers similar products, it was more of a defensive measure to protect the company’s market share.

The company recently signed an agreement with Nokia (NOK) to offer Word, Excel and PowerPoint features on select mobile phones from 2010. The revenue potential could be substantial, considering Nokia’s market share. While the deal should generate incremental earnings, many observers feel that it would mark the end of the Windows-based mobile operating system.

But Microsoft came up with yet another strategy to prove its adaptability to changing market dynamics. The company’s newly announced OneApp feature will use clouds to offer programs on GPRS phones in emerging markets. While smartphone penetration in these markets has been limited, feature phones have huge potential.

Microsoft has already entered into an agreement with South Africa’s Blue Label Telecoms, offering a dozen OneApp-powered applications. The initial package includes popular programs like Facebook, Twitter, Windows messenger and games. It would soon add other useful programs to enable bill payments and even health diagnosis.

The existing mobile operating systems from Research In Motion (RIMM) among others have made headway in the U.S. and other developed markets. Microsoft’s intention to target emerging markets makes sense to us.

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About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

It now appears that I have to do nothing, I just open a Yahoo finance/mail/or any other Yahoo page and there it is. But would I still continue using Google (GOOG)? I think not, especially if Google is not my home page and the content is more or less the same. This basically means that the focus has now shifted from use to content.

Microsoft has also introduced a freely downloadable version of MS Office, facilitating the use of the company’s word processing, spread sheet and PowerPoint products. Although Google already offers similar products, it was more of a defensive measure to protect the company’s market share.

The company recently signed an agreement with Nokia (NOK) to offer Word, Excel and PowerPoint features on select mobile phones from 2010. The revenue potential could be substantial, considering Nokia’s market share. While the deal should generate incremental earnings, many observers feel that it would mark the end of the Windows-based mobile operating system.

But Microsoft came up with yet another strategy to prove its adaptability to changing market dynamics. The company’s newly announced OneApp feature will use clouds to offer programs on GPRS phones in emerging markets. While smartphone penetration in these markets has been limited, feature phones have huge potential.

Microsoft has already entered into an agreement with South Africa’s Blue Label Telecoms, offering a dozen OneApp-powered applications. The initial package includes popular programs like Facebook, Twitter, Windows messenger and games. It would soon add other useful programs to enable bill payments and even health diagnosis.

The existing mobile operating systems from Research In Motion (RIMM), Apple (AAPL), Google and Nokia have made headway in the U.S. and other developed markets. Microsoft’s intention to target emerging markets makes sense to us.

As Google’s Android-based phones are just making their appearance felt, the new Microsoft solution could divert some buyers. The deal with Nokia, which is firmly entrenched in these regions, would play a key role in bringing Microsoft applications a superior foothold. We believe that offering the smartphone experience to existing cell phones is a smart strategy, as users are allowed to continue using handsets of their choice.

This is not all. Management also expects to launch a windows mobile apps store for cell phone users by the end of this year. Apple’s app store is very popular, although the most frequently downloaded applications are the ones that cost 99 cents. Microsoft’s ploy is to allow developers to fix their own prices, encouraging them to continue writing programs for Win Mo. We are encouraged by the company’s recent initiatives as we believe these are likely to improve its competitive position in both the search and mobile markets.

Quarterly net sales declined 3.4% year over year to $3.2 billion as the benefits from price/mix (+3.1%) and acquisitions (0.4%) were more than offset by negative tonnage (-0.5%) and currency translations (-6.4%). Internal sales, excluding impact of currency translations, increased 2.6%. Global cereal volume climbed about 2% during the quarter.

In North America, net sales increased 2.3% (internal growth 3%) driven by Cereals (+4%), Snacks (3%), Frozen (5%) and Specialty categories (5%). The cereal category had a strong quarter, with about 4% growth while overall quarterly consumption across all channels was up in the rage of 6% to 7%.

The snacks category had a challenging quarter impacted by the peanut-related recall, which was offset by the direct-store delivery business. Frozen and Specialty categories benefited on effective innovation.

Kellogg’s international operations experienced a net sales decline of 13% (internal sales increased 2%). Internal sales for Kellogg International comprise Latin America's net sales growth of 8%, Asia Pacific's growth of 3% and European decline of 1%. Europe continues to face a tough operating environment and stiff competition.

In Latin America, core brands such as Zucaritas, Corn Flakes and Choco Krispies continued to perform above expectations. In the Asia Pacific segment, South Africa, Korea and India delivered strong net sales growth, while Australia was hurt by challenging negotiation with a retail partner.

Based on the performance in the first half, management raised its guidance. Earnings growth is now expected in the range of 8% and 10% on a currency-neutral basis. This excludes effects of foreign-currency translation. Based on current rates, the company now sees a negative impact from foreign-currency exchange of about 6% to earnings for the full year.

Kellogg's guidance for the year also includes a substantial increase in up-front charges for cost-reduction initiatives to approximately $0.26 per share from the initial expectation of $0.14 per share.

We reiterate a Hold recommendation on Kellogg.

The company holds relatively high market share positions in many key markets -- ice cream in Turkey, laundry detergent in South Africa and soups & sauces in Indonesia. Unilever Brazil is the seventh largest operating company in that country.
 
Similarly in Asia, Unilever is a market leader in many categories including face care, skin cleansing, hair care, and fabric cleaning. The strategy of building relationships with local customers and suppliers through the managers who share the same culture is paving the way towards success in the developing and emerging markets for Unilever.

Another strong market for Unilever is Russia, with 7 manufacturing and production sites, along with leading brands such as Becel, Brooke Bond, Calvé, Hellmann's, Knorr and Lipton, together with Axe, Cif, Clear, Domestos, Dove, Rexona, Sunsilk and Timotei.

In addition, to strengthen Unilever’s existing dressing’s portfolio and its competitive position in Russia, one of its priority countries, the company acquired Baltimor Holding ZAO's sauces business, the leading ketchup business in Russia.

The acquisition, which follows the purchase of Russia's leading ice cream business, Inmarko, in 2008 and its commitment to build a state-of-the-art food production facility in Tula, further consolidates the position of Unilever's business in Russia.

Unilever’s research and development, along with its knowledge of the foods business -- coupled with Baltimor's local strengths -- can significantly enhance the company’s position in the Russian ketchup and dressings market.

We currently maintain a Buy rating on Unilever, as we expect the stock’s P/E to expand from current levels, driven by benefits from various growth plans along with cost savings from overhead simplification project.

With this backdrop, we are happy to find GlaxoSmithKline (GSK) acquiring the branded generics business of Bristol Myers Squibb (BMY) in the countries of Lebanon, Jordan, Syria, Libya and Yemen for a cash consideration of $23.2m (£14.2m). This transaction consists of a portfolio of 13 branded pharmaceuticals with annual sales of $11.8 million in 2008.

GSK is the world’s second largest pharmaceutical company, with operations primarily based in the U.K. and the U.S. This move is seen as the company’s strategy to expand its presence in branded products in emerging markets. Emerging markets have witnessed robust demand for branded products driven by a large population and middle class prosperity.

GSK is trying to expand its footprint into emerging markets for quite some time. In 2008, the company acquired businesses in Pakistan and Egypt from BMS (BMS), including a manufacturing plant in Giza, Greater Cairo. BMS will continue to supply the acquired products till 2011, after which the manufacturing will shift to the Giza plant of GSK.

GSK has entered a number of collaborations in the last few months. In June, it entered into a partnership deal with Dr. Reddy's Laboratories (RDY) involving a pipeline of more than 100 branded pharmaceuticals (some of these are still in developmental stage) covering wide segments such as cardiovascular, diabetes, oncology, gastroenterology as well as pain management. The products would be manufactured by RDY and would be licensed and supplied to GSK in various emerging markets such as Africa, the Middle East, Latin America and Asia Pacific excluding India.

Earlier in January 2009, Glaxo signed an agreement with UCB S.A for its marketed product portfolio in Africa, Middle East, Asia Pacific and Latin America, for a cash consideration of €515 million. In May, GSK acquired a 16% stake in Aspen Pharmacare Holdings Ltd, a South Africa-based generic drug maker in exchange for transfer of specialist products and a manufacturing facility in Bad Oldesloe, Germany.

Glaxo has to deal with the generic erosion of a number of drugs including Coreg IR, Flonase, Wellbutrin XR, Paxil, Lamictal, Requip, Valtrex and Imitrex. In order to recoup some of the losses caused by the patent expiry of these products, Glaxo has chosen the inorganic route to growth through acquisitions and partnerships.

Management has made it clear during the last quarter of 2008 conference call that while they will be looking for strategic acquisitions, they are not interested in doing a large deal. While the company faces a number of challenges, we continue to like the fundamentals at GSK. We have a Hold recommendation on the stock.

In addition to a large number of solutions in the area of power generation and transmission, Siemens is designing efficient traffic management solutions for mass transit systems. Siemens Healthcare has won a project to provide a hospital information system to 37 hospitals and about 300 clinics throughout the Gauteng Department of Health in South Africa.

The order volume is about €18 million and the system will be implemented within the next three years. In addition, lighting systems from its subsidiary Osram will be employed in eight out of ten World Cup stadiums.

In a related development, Siemens South Africa announced the appointment of Stuart Clarkson as chief executive officer with effect from 1st July, replacing outgoing CEO Siegmar Proebstl, who returns to Siemens in Germany. According to a UN report, some 530 million Africans have no access to electricity. Due to aging, outages are frequent in many connected regions. The energy requirement is vast and immediate in Africa.

Siemens is the world’s only supplier to offer technological solutions from a single source covering everything in the energy field from fuel extraction to engineering, procurement and commissioning of electrical systems. The company's closest competitors include Asea Brown Boveri and Areva.

We continue to maintain Hold rating on Siemens.

Based in Johannesburg, South Africa, DRDGOLD Limited (DROOY) announced that Mintails Limited (Mintails), an Australian listed public company with management and operations in South Africa, accepted its offer to acquire Mintails' South African business, excluding the underground explorer West Wits Mining Limited (WWI). The purchase consideration is based on the 30-day Volume Weighted Average Price (VWAP) of Mintails shares over the 30 trading days terminating on 24 June 2009, less the value of Mintails' holding in WWI based on the WWI trading VWAP for the same 30 trading days to 24 June, 2009. DRDGOLD in a stock deal has proposed to issue shares payment for the acquisition, calculated by a 30-trading day VWAP to 24 June 2009.

However, the offer is subject to a written approval of the boards of both the companies by July 31, 2009. The offer also requires approval of both Mintails and DRDGOLD's shareholders by August 31, 2009. In addition, the deal is also subject to the regulatory approvals in both countries.

Mintails Ltd. produces gold from two dump retreatment schemes on the East and West Rand in South Africa. The company owns more than 1.5 billion tons of tailings dump material in these regions, which can be treated to produce gold, uranium and sulphuric acid. DRDGOLD and Mintails are equal partners in the Ergo project on the East Rand.The acquisition is in line with DRDGOLD's strategy is to increase gold production sourced from surface material, which is cheaper and is less risky compared to underground mining.

DRDGOLD is generating healthy cash flow from operations and has lower debts. It benefits from rising gold prices. However, increasing operating costs as well as power shortage and labor issues do not bode well for the company. Thus, we rate the stock a HOLD with a six-month target price of $10.00.

Colorado-based Newmont Mining Corp. (NEM), the world's leading producer of gold, completed its acquisition of 100% of the Boddington project on June 25. Boddington - the largest gold project in Australia - is a large open pit mine, located 130 kilometres southeast of Perth. Previously, Newmont owned 66.66% of the project and completed 96% of the construction as of May.

In January, Newmont announced plans to purchase the remaining 33.33% interest in the project from AngloGold Ashanti Australia Ltd. - a wholly owned subsidiary of South Africa-based AngloGold Ashanti Ltd. (AU).

The total consideration for the 33.33% interest consists of $750 million paid in cash at closing; $240 million payable in cash and/or Newmont common stock, at Newmont's option, in December 2009; and a royalty capped at $100 million, equal to 50% of the average realized operating margin (if any) exceeding $600 per ounce, payable on a third of gold sales from Boddington.

Newmont intends to finance this acquisition by using a part of the net proceeds of about $1.7 billion from its recent IPO of 34.5 million shares of common stock and $517.5 million principal amount of 3.00% convertible senior notes due 2012.

The start-up of the project is expected soon. It has an anticipated 12-month ramp-up schedule. Newmont continues to expect total capital expenditures of $2.6 billion-$2.9 billion on a 100% basis for the project. It also sees the project adding between 375,000 equity gold oz and 450,000 equity gold oz in 2009.

Post-acquisition, Newmont expects its proven and probable reserves to increase by 6.6 million oz. Further, the company expects that the completion of the acquisition will lead to average annual gold sales of approximately 1 million oz at costs applicable to sales of approximately $300 per oz (net of by-product credits) for the first 5 years of operation. The project with an expected mine life of more than 20 years will be the Australia's largest gold producer upon completion.

We continue to recommend Newmont as Hold with a target price of $44.00.

Phase III Development of Laquinimod Progressing - Patient Enrolment Completed

On June 25, 2009, Teva Pharmaceutical (TEVA) and its development partner, Active Biotech announced that they have finished enrolling patients for a second pivotal phase III clinical study, BRAVO, which is being conducted to evaluate the novel, oral once-daily immunomodulating compound, laquinimod, for the treatment of relapsing-remitting multiple sclerosis (RRMS).

Multiple sclerosis is a nervous system disease that affects the brain, spinal cord and optic nerves. BRAVO will study the efficacy, safety and tolerability of laquinimod versus placebo. The trial has also been designed to provide risk-benefit data for laquinimod versus Avonex, a currently available injectable treatment.

The BRAVO study is being conducted with more than 1200 patients at 156 sites across the U.S., Europe, Israel and South Africa. Another phase III study, ALLEGRO, is currently ongoing in North America, Europe and Asia.

The MS market is huge and represents significant commercial potential. The company estimates that more than 400k people are affected by the disease in the U.S. Over 2 million people are estimated to be affected worldwide. Laquinimod enjoys Fast Track status in the U.S. and if all goes well, it could hit the market as soon as late 2011.

Once launched, laquinimod will be competing with products like Biogen Idec's (BIIB) Avonex, Bayer HealthCare's (BAYRY) Betaseron, Pfizer/Serono's (PFE) Rebif, and Biogen Idec/Elan's (BIIB/ELN) Tysabri. As MS is a life-long disease, an oral treatment like laquinimod could find preference over currently existing therapies which need to be injected or infused.

We maintain our Buy recommendation on Teva. The company delivered a strong performance in 2008 despite the global slowdown and we remain optimistic on the company's growth prospects - Teva should continue posting strong revenues and earnings on the back of new product launches, both generic and branded. Long-term growth should be supported by the company's branded and biogenerics pipeline. Meanwhile, the Barr acquisition should help Teva strengthen its position in the U.S. and expand its presence in Europe. We recommend purchase up to the $52 level.

Intellectual property has been a concern for investors ever since the summer of 2008 when the U.S. District Court in California removed The University of California from USPTO # 6,777,231, a patient licensed from Cal to Cytori which covers isolated adipose-derived stem cells. However, since that time, management has vigorously worked to protect its ability to isolate adipose-derived stem cells and sell the Celution System. And despite the loss of the '231 patent at Cal, Cytori has half a dozen other active patents protecting the Celution System, which includes 5 different device components or reagents.

In June 2008, Cytori received Notification of Issuance from the United States Patent & Trademark Office for its core patent covering the Celution System (USPTO # 7,390,484). This patent protects Cytori's key device technology, which processes adult stem and regenerative cells from adipose tissue at the patient's bedside.

The U.S. '484 patent is a central part of Cytori's global patent portfolio, which includes more than 150 pending patent applications worldwide, including in key international areas of Korea, Singapore, Australia, South Africa, and Japan. Listed within the patent are protection for the device, the single use consumerable, the proprietary reagents, and the harvest of adipose tissue via liposuction or lipectomy.

In January 2009, Cytori announced it had received USPTO # 7,473,420, which protects important formulations of the Celution System output. The '420 patient builds upon the '484 patent discussed above, issued in June 2008. Specifically, this new patent covers methods to combine the Celution System output with additives, such as scaffolds, matrices, or other agents to increase therapeutic effect, optimize or localize cell delivery, enhance specific cell properties or promote cell differentiation.

Additional patents pending include: USPTO # 7,514,075, which further builds upon the protection for the Celution device, the reagents, and the single use consumerable, as well as the user interface. USPTO # 7,429,488 protects the method for cosmetic and reconstructive surgery, and USPTO # 7,501,115 protects the method for cell banking.

Finally, we noted above Cytori's un-disclosed alliance with a pharmaceutical partner for the manufacturing, packaging, and quality-control on the Celase enzyme solution that is part of the entire system. The proprietary enzyme acts as a chemical scissor that has optimized to digest and break down tissue to release the clinically relevant stem regenerative cells. Management also adds growth factors and other washing agents to the process that, in total, significantly work to increase the barrier of entry for alterative stand-alone harvesting units.

In March 2009, management entered into definitive agreements to raise $10 million, before fees and expenses, through the sale of 4.77 million units, with each unit consisting of one share of common stock and 1.4 warrants, at a purchase price of $2.10 per unit. The warrants, which will represent the right to acquire up to an additional 6.68 million shares of common stock, will be exercisable beginning 6 months after the closing of the transaction at an exercise price of $2.59 per share. The warrants expire 5 years after the date the warrants are first exercisable.

In May 2009, Cytori entered into another definitive agreement to raise $4.2 million through a private placement with selective investors, through the sales of 1.86 million units at a purchase price of $2.28 per unit. Each unit consists of one unregistered share of common stock and 1.75 warrants. The warrants will be exercisable immediately after the closing of the transaction at an exercise price of $2.62 per share and have a 5-year term.

In June 2009, Cytori Therapeutics entered into an equity agreement with Seaside 88, LP, whereby Seaside has committed to purchase up to 7.15 million shares of Cytori common stock in a series of 26 transactions scheduled for every 2 weeks at 0.275 million shares per transaction. The first transaction closed on June 22, 2009 and provided net proceeds of approximately $0.852 million. Cytori has the right to discontinue the agreement between the 13th and 14th closings, based on the company's assessment of its financing needs at that time.

The purchase price for all closings executed under the agreement is determined by applying a 13% discount to a volume-weighted-average price (VWAP) of Cytori's common stock for the 10 trading days preceding each closing date. The scheduled closings will not take place if the VWAP for the 10 preceding trading days is less than $2.50.

Cytori exited the first quarter 2009 with $15.5 million in cash and investments. We estimate cash on hand at the end of the second quarter will be approximately $25 million. Although the dilution is disappointing, we note that the current cash balance should now be enough to fund operations through year-end 2010. We think that Cytori's financial position will continue to improve over the next several quarters as cash burn is reduced (guidance is for burn to drop by $1 to $1.5 million per quarter by year-end 2009) and revenues increase.

We continue to be positive on the name and recommend purchase up to $8 per share.

Bob Holderith is chief executive of Emerging Global Advisors. Richard Kang is chief investment officer for the New York-based company, which recently launched the first exchange-traded funds focused on specific sectors in emerging markets. (See related story here.)

EGA is expected to launch soon a third ETF that will act as a composite of the 10 underlying sectors in the Dow Jones emerging markets indexing series it’s using for current and upcoming funds.

The company says that nine more are in the works focusing on emerging markets sectors. Those will join the May launches of the EGS Emerging Markets Energy Fund (NYSE Arca: EEO) and the  EGS Emerging Markets Metals & Mining Fund (NYSE Arca: EMT).

IndexUniverse.com’s Murray Coleman caught up with Holderith and Kang late Thursday to discuss the future of sector investing in developing markets.

IU: What is available for U.S.-based investors in terms of foreign sector ETFs now?

Holderith: The family of Select Sector SPDRs is the dominant ETF line providing sector-based exposures.  They’ve got a long history. But those ETFs only focus on U.S. companies. For pure international exposure to foreign sectors, we’ve only seen two-  to three- years worth of actual performance history. And that’s through the iShares’ global sector family of funds as well as those of State Street Global Advisors. The SSgA  family is purely international sector ETFs.

IU: Then your firm’s line-up of international sector ETFs will compete most directly against those of SSgA?

Kang: No, since the SSgA ETFs are focused predominately on developed markets. For example, take the SPDR S&P International Financial Sector (NYSE: IPF). The top weighted countries are (in order): Japan, Canada, Australia, the U.K., Spain and Switzerland. The SSgA international sector ETFs do allow for some emerging markets exposure. But as cap-weighted indexes, they’re heavily skewed to developed countries.

IU: Why is your company going with pure emerging markets exposure rather than a mix of developed and emerging markets?

Holderith: There’s more than enough coverage of developed international markets now in the ETF marketplace. In terms of emerging markets, we’ve seen broad, regional and country specific funds. But we’re first to market with sector-specific ETFs for developing countries. The EMT and EEO ETFs are the first of a series we’re preparing to launch.

IU: What others are planned?

Holderith: We’ve got in the pipeline 10 ETFs still left to bring-to-market. Those will all use Dow Jones indexes, similar to those used by EMT and EEO. Dow Jones uses a classification system for sectors called the ICB (or industry classification benchmark) system. The other sector-specific ETFs in various stages of planning we’re working on launching cover: basic materials; consumer goods; consumer services; financials; health care; industrials; technology; telecom and utilities.

IU: You’ve also got a broader ETF that has received regulatory approval, don’t you?

Holderith: Yes, we’ve got a composite ETF that’s due to launch within the next few weeks.  That’s an ETF tracking a Dow Jones index that takes the top 10 names from each of the 10 major emerging markets sectors. (It won’t include metals and mining, which is a subsector of basic materials.)  So that will leave 100 names in the underlying composite index. And as in all of our ETFs, we have a rule that caps individual weightings at no more than 10%.

IU: In the composite index for such an emerging markets fund, what would the sector weightings look like then?

Holderith: Oil and gas along with financials are the dominant sectors in the composite index.

IU: What type of performance have you seen through back-tested data for emerging markets sector indexes compared to developed markets sector indexes?

Kang: We have data going back many years for the underlying benchmarks. The data for emerging markets, however, isn’t as robust as that for developed markets. So we really focus on data going back to December 2005 when comparing the Dow Jones composite benchmark we’re using for our emerging markets sector funds.

IU: What do those comparisons show?

Kang: Going back to 2005, returns were generally spectacular up through 2007 for emerging markets vs. developed markets. In the latter half of 2008, we saw greater volatility and bigger losses in emerging markets. As with any more volatile asset class, emerging markets offers the potential for greater long-term gains as a result. Clearly, some sectors performed better in relative terms during the periods when markets were going up versus others.  The same is true in the bear market of 2008.  That is the essence of the popularity of sector funds -- their selection during different stages of the market cycle.

IU: How correlated are emerging markets sectors to developed markets sectors?

Kang: That’s a tricky question. It depends on your timeframe. In statistical terms, there’s just not a lot of data. But you can draw some general conclusions. There are times, like in the bull market from 2005-2007, when many sectors in emerging markets and developed markets were highly correlated. Commodity stocks were highly correlated during the commodities boon regardless of location. On the other hand during the credit crisis, financials haven’t been as highly correlated because banks in the U.K, for example, have been exposed to more toxic assets than banks in places like China, Brazil and India.

IU: What do you see as the biggest benefits of breaking emerging markets into sectors?

Kang: A lot of investors managing their emerging markets exposures are doing so by allocating between countries. The question we asked at the very beginning of creating our ETFs is how much overlap there is between sectors and geography.

Let’s say you’re an American investor with heavy exposure to the S&P 500 index. Maybe you’ve tilted your  portfolio a little to commodities through funds such as the SPDR Gold Shares (NYSE: GLD) and the iPath Dow Jones-AIG Commodity Index ETN (NYSE: DJP). If you’ve got that portfolio, you look more like a Canadian or an Aussie – both of those countries are heavily influenced by movements in natural resources prices.

IU: In other words, broader-based ETFs don’t add a lot in those situations?

Kang: The inclusion of broad emerging market ETFs as well as many of the country specific ETFs to this kind of portfolio would not provide diversification as correlations would be surprisingly high.  For true diversification, the inclusion of certain sectors would likely provide more optimal risk-return characteristics to the overall portfolio.

Furthermore, many investors who invest in emerging markets country ETFs do so based on a sector-type of rationale. For example, let’s say someone wants to invest in Russia. The question I would ask is: Do you want to invest in that country to be more richly compensated with some sort of political risk associated with that country? Or, are you investing in Russia to make an oil and gas bet? If that’s the case, do you want to put all your eggs in one basket – Russia. Or, would you prefer to invest in a basket focused on oil and gas but with companies from Russia, India, China, Brazil and several others?

IU: Those are the top countries in EEO, aren’t they?

Kang: Yes. Those four countries comprise roughly two-thirds of the fund. And with EMT, the top countries are: South Africa, Brazil, China and Russia. Those take up more than three-quarters of the fund.

Bob Holderith is chief executive of Emerging Global Advisors. Richard Kang is chief investment officer for the New York-based company, which recently launched the first exchange-traded funds focused on specific sectors in emerging markets. (See related story here.)

EGA is expected to launch soon a third ETF that will act as a composite of the 10 underlying sectors in the Dow Jones emerging markets indexing series it’s using for current and upcoming funds.

The company says that nine more are in the works focusing on emerging markets sectors. Those will join the May launches of the EGS Emerging Markets Energy Fund (NYSE Arca: EEO) and the  EGS Emerging Markets Metals & Mining Fund (NYSE Arca: EMT).

IndexUniverse.com’s Murray Coleman caught up with Holderith and Kang late Thursday to discuss the future of sector investing in developing markets.

IU: What is available for U.S.-based investors in terms of foreign sector ETFs now?

Holderith: The family of Select Sector SPDRs is the dominant ETF line providing sector-based exposures.  They’ve got a long history. But those ETFs only focus on U.S. companies. For pure international exposure to foreign sectors, we’ve only seen two-  to three- years worth of actual performance history. And that’s through the iShares’ global sector family of funds as well as those of State Street Global Advisors. The SSgA  family is purely international sector ETFs.

IU: Then your firm’s line-up of international sector ETFs will compete most directly against those of SSgA?

Kang: No, since the SSgA ETFs are focused predominately on developed markets. For example, take the SPDR S&P International Financial Sector (NYSE: IPF). The top weighted countries are (in order): Japan, Canada, Australia, the U.K., Spain and Switzerland. The SSgA international sector ETFs do allow for some emerging markets exposure. But as cap-weighted indexes, they’re heavily skewed to developed countries.

IU: Why is your company going with pure emerging markets exposure rather than a mix of developed and emerging markets?

Holderith: There’s more than enough coverage of developed international markets now in the ETF marketplace. In terms of emerging markets, we’ve seen broad, regional and country specific funds. But we’re first to market with sector-specific ETFs for developing countries. The EMT and EEO ETFs are the first of a series we’re preparing to launch.

IU: What others are planned?

Holderith: We’ve got in the pipeline 10 ETFs still left to bring-to-market. Those will all use Dow Jones indexes, similar to those used by EMT and EEO. Dow Jones uses a classification system for sectors called the ICB (or industry classification benchmark) system. The other sector-specific ETFs in various stages of planning we’re working on launching cover: basic materials; consumer goods; consumer services; financials; health care; industrials; technology; telecom and utilities.

IU: You’ve also got a broader ETF that has received regulatory approval, don’t you?

Holderith: Yes, we’ve got a composite ETF that’s due to launch within the next few weeks.  That’s an ETF tracking a Dow Jones index that takes the top 10 names from each of the 10 major emerging markets sectors. (It won’t include metals and mining, which is a subsector of basic materials.)  So that will leave 100 names in the underlying composite index. And as in all of our ETFs, we have a rule that caps individual weightings at no more than 10%.

IU: In the composite index for such an emerging markets fund, what would the sector weightings look like then?

Holderith: Oil and gas along with financials are the dominant sectors in the composite index.

IU: What type of performance have you seen through back-tested data for emerging markets sector indexes compared to developed markets sector indexes?

Kang: We have data going back many years for the underlying benchmarks. The data for emerging markets, however, isn’t as robust as that for developed markets. So we really focus on data going back to December 2005 when comparing the Dow Jones composite benchmark we’re using for our emerging markets sector funds.

IU: What do those comparisons show?

Kang: Going back to 2005, returns were generally spectacular up through 2007 for emerging markets vs. developed markets. In the latter half of 2008, we saw greater volatility and bigger losses in emerging markets. As with any more volatile asset class, emerging markets offers the potential for greater long-term gains as a result. Clearly, some sectors performed better in relative terms during the periods when markets were going up versus others.  The same is true in the bear market of 2008.  That is the essence of the popularity of sector funds -- their selection during different stages of the market cycle.

IU: How correlated are emerging markets sectors to developed markets sectors?

Kang: That’s a tricky question. It depends on your timeframe. In statistical terms, there’s just not a lot of data. But you can draw some general conclusions. There are times, like in the bull market from 2005-2007, when many sectors in emerging markets and developed markets were highly correlated. Commodity stocks were highly correlated during the commodities boon regardless of location. On the other hand during the credit crisis, financials haven’t been as highly correlated because banks in the U.K, for example, have been exposed to more toxic assets than banks in places like China, Brazil and India.

IU: What do you see as the biggest benefits of breaking emerging markets into sectors?

Kang: A lot of investors managing their emerging markets exposures are doing so by allocating between countries. The question we asked at the very beginning of creating our ETFs is how much overlap there is between sectors and geography.

Let’s say you’re an American investor with heavy exposure to the S&P 500 index. Maybe you’ve tilted your  portfolio a little to commodities through funds such as the SPDR Gold Shares (NYSE: GLD) and the iPath Dow Jones-AIG Commodity Index ETN (NYSE: DJP). If you’ve got that portfolio, you look more like a Canadian or an Aussie – both of those countries are heavily influenced by movements in natural resources prices.

IU: In other words, broader-based ETFs don’t add a lot in those situations?

Kang: The inclusion of broad emerging market ETFs as well as many of the country specific ETFs to this kind of portfolio would not provide diversification as correlations would be surprisingly high.  For true diversification, the inclusion of certain sectors would likely provide more optimal risk-return characteristics to the overall portfolio.

Furthermore, many investors who invest in emerging markets country ETFs do so based on a sector-type of rationale. For example, let’s say someone wants to invest in Russia. The question I would ask is: Do you want to invest in that country to be more richly compensated with some sort of political risk associated with that country? Or, are you investing in Russia to make an oil and gas bet? If that’s the case, do you want to put all your eggs in one basket – Russia. Or, would you prefer to invest in a basket focused on oil and gas but with companies from Russia, India, China, Brazil and several others?

IU: Those are the top countries in EEO, aren’t they?

Kang: Yes. Those four countries comprise roughly two-thirds of the fund. And with EMT, the top countries are: South Africa, Brazil, China and Russia. Those take up more than three-quarters of the fund.