Asian Companies Dominate DR Capital Raising in Q3

Asian companies dominated capital raising through depositary receipts (DR) in the third quarter, with the region accounting for more than $2.6 billion, or nearly half, of the global capital raised through September.

DRs typically represent non-U.S. ordinary shares and trade on traditional and over-the-counter (OTC) markets and stock exchanges. BNY Mellon acts as depositary for more than 2,700 American and global depositary receipt programs.

In the custodian bank’s DR Market Update, capital-raising picked up modestly in the third quarter, led by offerings from Asia-based firms and rising to more than $5.6 billion through the first nine months of the year.

Companies coming to market ranged across sectors, from traditional industrials to alternative energy, and raised more than $2 billion during the quarter, up from $1.4 billion in the second quarter. Fubon Financial Holding led with a global depositary receipt (GDR) offering in July of $850 million. Fubon was one of three offerings from Asia in the third quarter, along with ReneSola and JA Solar of China, where BNY Mellon acted as depositary.

Asia-based companies dominated the list of top-performing individual DR programs through September, several of which saw their DR price more than quadruple year-to-date, including Taiwan’s Inotera Memories and Himax Technologies, or triple in value, such as China’s JinkoSolar. The best overall performing DR through the first nine months was Denmark’s Vestas Wind Systems, up 341%, fractions of a percentage point ahead of South Korea’s Hanwha SolarOne.

“Third quarter activity builds on the momentum created earlier in 2013 with China’s LightInTheBox IPO and Japan’s UBIC capital raising,” said Christopher Kearns, CEO of BNY Mellon’s Depositary Receipts business. “We’re seeing a steady uptick in the companies coming to market as well as investor appetite for those offerings, both from developed and developing countries. Depositary receipts continue to serve as the bridge for efficient cross-border investing.”

Outside of Asia, discount airline Volaris staged a roughly $500 million initial public offering in the year’s first dual-listing from Mexico, listing certificates of ordinary participation in Mexico and ADRs on the New York Stock Exchange. South African transport software and hardware management company MiX Telematics launched an IPO in August, listing ADRs on the NYSE and raising just over $100 million.

Through September the top-performing BNY Mellon country index, comprising DRs from locally based companies, was Argentina (+37%), followed by Japan (+23%), according to the BNY Mellon Classic ADR IndexSM Series. Returns on indices for Western European countries, such as Switzerland, the Netherlands, France and Spain, rounded out most of the top 10. As the only real-time index to track all ADRs, New York shares, and global registered shares traded on the NYSE, NASDAQ and over-the-counter, the BNY Mellon Classic ADR Index is a widely used international benchmark.

Other highlights from the DR market update include:
– The most actively traded DRs globally by value included China’s Baidu, the U.K.’s Vodafone, Brazil’s Vale and Petrobras, BP, Russia’s Gazprom and Sberbank, Finland’s Nokia, and Mexico’s America Movil.

– The top 10 DRs in terms of price performance year-to-date include a 341% leap by Denmark’s Vestas Wind Systems and South Korea’s Hanwha SolarOne, followed by China Sunergy (323%), Taiwan’s Inotera Memories (320%),Taiwan’s Himax Technologies (+317%), and then China’s JinkoSolar (263%) and Trina Solar (+256%), a 230% gain seen in the U.K.’s Thomas Cook, followed by China’s YY Inc. (+228%) and ReneSola (+224%).

– The BNY Mellon Classic ADR IndexSM Series, which tracks the performance of depositary receipts by country of origin, showed Argentina leading with price gains of 37% year-to-date, followed by Japan (+23%), Switzerland (+20%), Netherlands (+19%), France (+18%), Spain (+16%) and Germany (+14%).
The most active industries year-to-date were Commercial Banks with 17 billion DRs traded, valued at $194 billion.

– Western Europe saw more than 35 billion DRs traded, valued at $718 billion, followed by Latin America where 30 billion DRs traded in the third quarter worth $460 billion, Asia Pacific had 23 billion DRs worth $466 billion change hands, Eastern Europe saw 17 billion DRs bought and sold in transactions totaling $172 billion, and the Middle East and Africa, where 3.7 billion DRs traded totaling $57 billion.