MERCHANDISER
MERRILL LYNCH has expanded its line of ‘green’ indices tributing to increased fuel efficiency.
with a new product that tracks the growing movement to Merrill Lynch’s analysts note the global manufacturing
reduce energy costs and emissions. Merrill Lynch has intro- industry could improve its energy efficiency by 18-26%
duced the Merrill Lynch Energy Efficiency Index, identify- over all (and at the same time reduce the sector’s CO
2
ing industry sectors which should benefit from the global emissions by 19-32%). While not all of these potential
drive to improve energy efficiency. The index initially com- savings are likely to occur without a strong framework of
prises 40 companies globally that Merrill Lynch believes regulation and/or incentives, the potential over time is
should benefit from the growing momentum to reduce considerable. The index also highlights companies in the
CO
2
emissions and the cost of energy. capital goods sector which are best positioned to reduce
CO
2
emissions and energy consumption across
New Energy Efficiency Index
the industry.
The market for power semiconductors also
looks well positioned for strong growth driven by
“While there has been a clear shift of resources and the need to improve energy efficiency throughout the
investor attention into renewable energy, energy efficiency electricity supply chain from generation, through distribu-
remains an area that is relatively under-explored,” accord- tion to end consumption. Focusing on consumption, there
ing to Asari Efiong, Merrill Lynch SRI/Renewable Energy are a number of ways that chip companies can lower the
Equity Analyst. “We believe that energy efficiency repre- amount of energy required including reducing standby
sents a significant market opportunity for investors, as poli- power, lowering heat loss in power supplies and the intro-
cy changes look set to force a structural shift in demand.” duction of variable speed drives in motors. The new Index
The Index is divided into four components: integrated includes the leading companies in power semiconductors
plays with a focus on the capital goods sector; fuel effi- together with companies which are best positioned in effi-
ciency in the automotive industry; building insulation; and cient lighting (both CFL and LEDs) and smart metering.
energy-efficient solutions, including products, applications Finally, Merrill Lynch analysts have identified the build-
and industrial processes. ing sector as the area with the largest potential for energy
In the automotive industry, the confluence of energy efficiency gains at the lowest cost. The companies includ-
security concerns and growing awareness of climate ed in the index are fully expected to be exposed to double-
change are fuelling more stringent and widespread regula- digit demand growth in the building insulation sector.
tions on CO
2
emissions and energy efficiency. In light of Merrill Lynch’s view of robust demand growth is under-
these trends, Merrill Lynch highlights the companies which pinned by a new wave of legislation, particularly in Europe,
could benefit from tightening fuel emission standards targeting this segment of the market.
which are mostly market leaders in new technologies con-
www.ml.com
GLOBAL PIONEER in exchange Securities to create these new to a range of four different
traded commodities, ETF Securities products, allowing investors to maturities with varying rates of
(ETFS) has delivered another world implement different investment backwardation or contango.
first by listing six new oil Exchange strategies in oil. Historical simulations show that the
Traded Commodities (ETCs) on the
London Stock Exchange (LSE) – for
the first time offering investors the
Six Oil ETCs Launched
opportunity to gain direct and
simple exposure to one, two and Demand for these new ETCs is also performance of each of the four
three year oil futures prices in Brent being driven by investors searching different maturities varies
and WTI oil benchmarks. for a means to expose their portfolio considerably in the short-term but is
ETFS Brent Oil was first listed on the to the benefits of backwardation similar over the long-term. The ETCs
LSE in July 2005 and ETFS WTI Oil which can provide a source of return with exposure to the longest
was listed in May 2006. Since then, in addition to the oil price return. maturity had the lowest volatility.
Oil ETCs have accumulated over Due to the dynamic nature of Commenting on launching another
US$200 million in assets and are backwardation and contango, world first, Graham Tuckwell,
listed on five European stock investors wish to be able to track Chairman of ETF Securities, said,
exchanges including the LSE, different oil futures dependent on “Many investors have approached us
Deutsche Borse, Euronext Paris, this feature. showing an appetite for a range of
Euronext Amsterdam and Borsa ETCs are priced off ICE Future’s oil ETCs. Increased investor demand
Italiana. Trading volumes in the two Brent and NYMEX’s WTI oil futures, and knowledge has resulted in
existing oil ETCs now total US$100 and the return of ETCs is thus investors wanting access to more
million each month. influenced by the shape of the oil sophisticated trading and
Substantial demand from investors futures curve. With a total of eight investment strategies.
for more choice for different parts of oil ETCs available, investors now
www.etfsecurities.com
the oil futures curve has led ETF have the choice of gaining exposure
16 SEPTEMBER 2007 COMMODITIES NOW
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