Broad-based issuer and investor interest in the American and global depositary receipt markets remained strong through the first six months of 2005, according to an analysis by The Bank of New York.
Investors continued to own depositary receipts at record levels, while companies from emerging markets led new depositary receipt capital raisings and companies from developed markets saw their receipts lead global trading volume.
“During the first six months of 2005, the key DR market metrics continued the substantial gains seen over the past two years,” said Christopher Sturdy, managing director and head of The Bank of New York’s depositary receipt division. “We are particularly pleased to report that DR capital raising transactions, the only major area of the market that had not rebounded, have steadily increased in the first half of the year.”
The total value of U.S. investment in non-U.S. equities increased to an all-time high of $2.4 trillion as of March 31, 2005, an increase of 16 percent from the same time last year, according to the latest U.S. Federal Reserve statistics. Depositary receipts continue to comprise a significant part of this investment and the total value of U.S.-listed depositary receipts rose similarly, increasing to $548 billion at the end of the first quarter, a jump of 14 percent from the same time last year and an all-time high.
The Bank of New York reports DR trading volume on the New York Stock Exchange, the American Stock Exchange and NASDAQ was 19.2 billion DRs, valued at $451 billion for the first six months of 2005. Both figures are similar to 2004’s half-year statistics and projected to finish the year close to 2004’s final figures when annual DR trading reached a record volume of 37.4 billion valued at $852 billion.
During the first half of 2005, DRs from the energy sector, led by the U.K.’s BP and The Netherlands’s Royal Dutch Petroleum, the pharmaceutical sector, led by Ireland’s Elan and Israel’s Teva, and the technology sector, led by Finland’s Nokia and Sweden’s Ericsson, were among the most active.
Industry wide, The Bank of New York reports a record 1,866 sponsored DR programs for issuers from 73 countries were available to investors at mid-year 2005. The Bank also reports that companies from 28 countries established 67 new DR programs during the first six months of the year, an increase of one percent from the same period last year. Companies from India and Australia issued the most new DR programs through the first six months of the year with 13 and nine, respectively.
The most significant growth area of the depositary receipt market was in capital raising transactions. During the first half of 2005, 38 new receipt offerings by non-U.S. companies and governments raised $11.8 billion – surpassing 2004’s full-year total of $11.3 billion in 53 new DR offerings. As expected, issuers from the emerging market “BRIC” countries of Brazil, Russia, India and China plus Taiwan accounted for 80 percent of all DR capital raising transactions.
Of note in the Asian emerging markets were the initial public offerings of China Techfaith Wireless and Korea’s Kumho Tire and Gravity. Follow-on offerings by India’s Infosys Technologies, ICICI Bank and UTI Bank as well as Taiwan’s Chi Mei Optoelectronics and Far EasTone Telecommunications were successfully completed.
In the European emerging markets, three Russian companies dominated with Sistema, Pyaterochka Holding and Evraz Holding raising more than $2.5 billion combined with receipts in their IPOs. In Latin America, Brazil’s Submarino successfully completed an IPO and raised capital with DRs, while Mexico’s FEMSA and Brazil’s GOL Airlines tapped the market with follow-on DR offerings.
Issuers from the developed markets completed only four depositary receipt capital raising transactions – three of which, however, were among the largest so far this year. The U.K’s Barclays Bank and Royal Bank of Scotland each completed preference share DR offerings of $1 billion while Belgium’s RHJ International raised $1.1 billion. The fourth, Italy’s Gentium, listed on the Amex with a small capital raising.