Could it be our old buddy Jeremy?
Bank Of New York/Brazil Telebras -2: Vying For Liquidity
By swiftly preempting RTBs' fee advantage, BONY may
well save HOLDRs from disappearing in the wake of the
RTBs.
Analysts and traders extended a warm welcome to J.P.
Morgan's still-untraded instrument, hailing its (previously)
lower fee structure, and the fact that it has a very liquid
underlying security, the RTCB 40.
The fact that RTCB 40s have become the most liquidly
traded security in the Sao Paulo Stock Exchange since
the Telebras spin-off affords investors easier arbitrage
possibilities, analysts said.
"It opens up arbitrage opportunities, because you can
switch it relatively easily into the underlying receipts,"
according to ABN Amro telecommunications analyst
Christofer de Mattos. "You have to be pretty brave to do
it with TBH."
This is because to convert from HOLDRs into the local
receipts, investors have to first convert into Telebras -
which in the future will mean switching into 13 different
ADRs - then go into the individual local shares, and
subsequently convert into the local basket instrument.
"I would venture to suggest that the market will prefer the
Morgan vehicle," said Deutsche Bank Securities head of
trading Jeremy Smith. "They're issued directly on the
back of a local share, versus a receipt on a receipt."
Market participants said that the new ADR will likely
detract liquidity from a crowded field, with dozens of
Telebras-related instruments trading locally and in New
York.
But BONY remains hopeful: "We anticipate that TBH
will remain a highly liquid instrument, and it's possible that
it'll become the most liquid" alternative, the BONY
official said. "We've got a good reaction, and given
adjustment in fees, and our success so far, we're positive
that we're going to see some conversion on Tuesday."
-By Margarita Palatnik; 201-938-2226;
margarita.palatnik@cor.dowjones.com
(END) DOW JONES NEWS 10-09-98
05:16 PM |
