DR capital raisings almost triple to $11.7 billion; Issuers from BRIC countries dominate key DR metrics as investors diversify portfolios globally
NEW YORK, July 20, 2011 — Record levels of liquidity and an increase in new depositary receipt (DR) programs were highlights of the American and global depositary receipt (DR) market, according to BNY Mellon's 2011 Mid-Year Market Update.
"Uneven equity markets and divergent economic outlooks between the developed and emerging markets led to record DR trading volume during the first half of 2011," said Michael Cole-Fontayn, chief executive officer of BNY Mellon's Depositary Receipt Division. "Market conditions allowed emerging market issuers to raise capital through primary and follow-on DR offerings, nearly tripling the amount of DR capital raised year-over-year. A record 3,400+ DR programs are now available to the world's investors."
Highlights of the report include:
Investors around the World Trade DRs in Record Numbers
DR trading volume increased 3.1% to a record 80.5 billion DRs, valued at $1.91 trillion on global markets and exchanges during the first six months of 2011, according to data provided by Bloomberg. The major U.S. stock exchanges — the New York Stock Exchange (NYSE) and NASDAQ — remained the largest exchanges for DR trading by a considerable margin. U.S.-listed DRs traded $1.61 trillion in value and 65 billion in volume during the first half of 2011, 84% and 81% of the global total, respectively. The most actively-traded U.S.-listed DRs by value included China's Baidu, Brazil's Vale and Petrobras, the UK's BP, Israel's Teva and Australia's BHP Billiton.
More than 12.6 billion DRs valued at $210 billion traded on the International Order Book (IOB), the trading venue for most London Stock Exchange (LSE) and Luxembourg Stock Exchange (LuxSE) listed DRs. These figures represent increases of 30% and 38%, respectively, year-over-year. Russian issuers dominated the top 10 most actively-traded IOB DRs with Gazprom, Lukoil, and Norilsk Nickel leading the way.
U.S. over-the-counter (OTC) DR trading value totaled more than $55.4 billion, an increase of 52% year-over-year. The most active OTC-traded DR issues included Switzerland's Nestle and Roche, Russia's Gazprom, Spain's Repsol and Germany's BASF. Trading on other venues amounted to $36.4 billion.
Total Value of U.S. Investment in Non-U.S. Equities Grew Again
As of March 2011, according to statistics released in June by the U.S. Federal Reserve, the total amount of U.S. investment in global equities increased 15.7% year-over-year to approximately $24.2 trillion. Non-U.S. equities (both DRs and ordinary shares) accounted for 18.9% of this amount, or $4.6 trillion, a 13.8% year-over-year increase.
Australian Issuers Led New DR Establishment; Companies Choose Several Exchanges as their Listing Venues
During the first half of 2011, 79 new sponsored programs for issuers from 26 countries were established, an increase of 15 programs or 23.4% from the same period last year. Of 2011's new DR programs, 28 were listed on stock exchanges — 11 on the LuxSE, seven on the NYSE, six on the LSE, and four on NASDAQ. The remaining DR programs trade on various OTC markets, including two on the OTCQX platform in the U.S.
Issuers from Australia led with 13 new programs, followed by 12 from India, and nine each from Russia and China. The first U.S. OTC-traded DR program from Pakistan was established for Fatima Fertilizer and Vietnam's HAGL established the country's first ever DR program, which listed on the LSE.
Issuers from China, India and Russia Led DR Capital Raising
Issuers from Russia accounted for nearly half of the total capital raised this year, while India and China accounted for the largest number of transactions.
During the first six months of the year, 39 initial and follow-on DR offerings by non-U.S. companies and governments raised $11.7 billion. Seven issuers from Russia raised $5.5 billion. Of this figure, VTB's $2.8 billion follow-on offering was by far the largest DR capital raising this year. Issuers from China and India completed the most offerings with 12 and 11 respectively, totaling $2.6 billion and nearly $200 million respectively. Of note were the follow-on offerings of Brazil's Gerdau, which raised $978 million; Argentina's Ternium, which raised $779 million; and Taiwan's Wintek, which raised $330 million.
BNY Mellon ADR Index Performance
As the only real-time index to track all ADRs, New York Shares and global registered shares traded on the NYSE, NYSE Amex and NASDAQ, the BNY Mellon ADR Index has become a widely followed international benchmark. During the first half of 2011, overall DR performance, as tracked by the ADR Index, was modestly positive. On June 30, 2011, the ADR Index closed at 198.78, up 3.8% year-to-date, while showing a strong 30% gain year-over-year. At the mid-year mark, the ADR Index had 377 constituents and a free-float market capitalization, as defined by Dow Jones Indexes, in excess of $5.4 trillion.
Nineteen of the 34 country ADR Indices were up through June. The Germany ADR Index and France ADR Index led gainers with returns of 15.9% and 14.8% year-to-date. Australia's Genetic Technologies led as the best-performing ADR Index constituent, returning 556%. Other top-performing Index constituents included Taiwan's Silicon Motion, up 152%, and Ireland's Elan, up 98%.
DRs continued to grow as an investment vehicle due to their inclusion in Exchange-Traded Funds (ETFs). During the first half of 2011, Guggenheim Funds launched the Guggenheim ABC High Dividend ETF that tracks the BNY Mellon ABC Index. The Index is comprised of 30 securities from Australia, Brazil and Canada selected by the highest dividend yield. Also, the second actively-managed international ETF, the Madrona Forward International ETF, began trading on the NYSE. The Fund offers investors a broadly diversified forward-looking allocation strategy based on analyst consensus estimates of the present value of future projected earnings relative to the price of each security. The Fund held 250 DRs and references both the BNY Mellon Classic ADR Index and the MSCI EAFE Index.
Unsponsored Market Update
In the first half of 2011, 72 new unsponsored DR programs were established for issuers from 20 countries, up from 50 programs from 15 countries at the same time last year. The total number of unsponsored DR programs rose to 1,175 at the mid-year mark. In 2011, notable issuers that converted their unsponsored DR programs to sponsored DR programs included Russia's Sberbank, Hong Kong's AIA, Australia's QBE, and Austria's Vienna Insurance.
BNY Mellon's Depositary Receipt Leadership
During the first six months of 2011, BNY Mellon grew its depositary leadership position across many metrics, acting for 64% of all new sponsored DR programs, 59% of DR capital raising transactions and 58% of all DR capital-raising value. In addition, four of the seven companies that converted their DR programs from unsponsored to sponsored selected BNY Mellon as sole depositary. By mid-year, three companies – Germany's Software AG and Aixtron and Russia's Cherkizovo Group – moved four sponsored programs from other depositaries to BNY Mellon. This accounted for 67% of all successorships, industry-wide. As of June 30, 2011, BNY Mellon acted as depositary for 62% of all sponsored DR programs, globally.
BNY Mellon acts as depositary for more than 2,100 American and global depositary receipt programs, acting in partnership with leading companies from 67 countries. With an unrivaled commitment to helping securities issuers succeed in the world's rapidly evolving financial markets, the company delivers the industry's most comprehensive suite of integrated depositary receipt, corporate trust and stock transfer services. Learn more at www.bnymellon.com/dr.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $26.3 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.8 trillion in outstanding debt and processes global payments averaging $1.7 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available at www.bnymellon.com and through Twitter @bnymellon.
 Statistics are as of June 30, 2011, unless otherwise noted.
This release is for informational purposes only. BNY Mellon provides no advice nor recommendation or endorsement with respect to any company or securities. Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities. Depositary Receipts: Not FDIC, State or Federal Agency Insured; May Lose Value; No Bank, State or Federal Agency Guarantee.