International companies continue to turn to U.S. stock exchanges to connect with American investors for their initial public offerings and subsequent capital raising activities, according to BNY Mellon's Depositary Receipts 2014 Midyear Update.*
The first half of 2014 saw the highest level of DR capital raisings in the last three years. As of June 30, 41 capital markets transactions globally raised more than $9.1 billion, well ahead of the $3.6 billion raised through 20 transactions during the same period in 2013. BNY Mellon served as depositary bank for 18 of this year's deals, which have raised over $3.1 billion.
Companies from Asia-Pacific have dominated activity to date, accounting for almost 60% of capital raised with more than $5.5 billion. China was responsible for nearly half of the new capital raising DR programs, led by online direct sales firm JD.com, whose IPO on NASDAQ raised $1.8 billion in May. The majority of DR transactions in the first half of 2014 were from emerging countries. TBC Bank's listing of DRs on the London Stock Exchange represented the largest IPO ever to come out of Georgia. BNY Mellon also supported Brazilian telecarrier Oi in raising $3 billion in the public markets, 40% of which was in DR form.
"After a period marked by concern over U.S. Federal Reserve tapering, investor sentiment is again turning to emerging markets to seek out innovative companies with which to partner," said Christopher M. Kearns, CEO of BNY Mellon's Depositary Receipts business. "The vigorous return of foreign IPOs on U.S. exchanges, using the efficiency and scope of DRs, would indicate that global firms and investors see this as a healthy marketplace with strong upside."
Depositary receipts typically represent non-U.S. companies' ordinary shares and trade on traditional and over-the-counter markets and major stock exchanges worldwide. There are now more than 3,700 DR programs globally available to investors.
Fifty-five new sponsored DR programs were established through June 30, the biggest jump in sponsored programs since 2011. BNY Mellon served as depositary for 28 of those.
The volume and value of total DRs traded rose compared to a year ago. Some 74.6 billion DRs valued at $1.49 trillion were traded globally in the first half of 2014, up 3.5% and 15.5%, respectively, from the first half of 2013.
As of March 31, 2014, total global investment in depositary receipt programs stood at $826 billion, up 18% compared to the same period in 2013.
Globally, 41 DR transactions raised more than $9.1 billion. APAC led with 24 DR programs raising more than $5.5 billion, with China responsible for 18 of those and $4.5 billion raised; EMEA followed with 14 capital raisings equating to $2.3 billion, with Russia responsible for two transactions that raised $1.3 billion; while LATAM saw three transactions from Brazil and Chile that raised $1.3 billion.
The top 10 DRs as defined by price performance through June 30 were led by the Chinese company Vipshop (+124%), followed by China's Bitauto (+52%), China's YY Inc. (+50%), AngloGold from South Africa (+47%), Shanda Games from China (+45%), Brazil's CEMIG (+42%), China's 58.Com (+41%), China's Dangdang (+40%), Ming Yang Wind Power from China (+40%), and India's HDFC Bank (+37%).
The BNY Mellon Classic ADR Index(SM) Series, which tracks the performance of depositary receipts by country of origin, showed Denmark with the highest total return through June 30 at +25.5%, followed by Israel (+25.4%), Indonesia (+22.3%), Italy (+18.8%), and Norway (+14.3%).
By sector, the BNY Mellon Classic ADR Index(SM) Series had Utilities leading with total returns of 16%, followed by Oil & Gas (+12%), Health Care (+11.8%), Technology (+5.2%), and Composite (4.5%)
The Europe, Middle East, Africa (EMEA) region experienced the most trading traffic with 32.9 billion DRs traded with a value of $695.4 billion, followed by Asia-Pacific, which traded 19.3 billion DRs valued at $524 billion, and Latin America with 22.3 billion DRs traded at a value of $273.9 billion.
Oil, Gas, & Consumable Fuels was the most actively traded sector with 12.5 billion DRs traded at a value of $226.4 billion. Banks came in second at 10.9 billion DRs traded at a value of $117.1 billion, followed by the Metal & Mining industry with 8.9 billion DRs traded and valued at $137.9 billion, Semiconductors & Semiconductor Equipment sector with 6.1 billion DRs traded at a value of $97 billion, and Internet Software & Services with 4.3 billion DRs traded at a value of $206.6 billion.
When mobile phone carrier Vodafone sold its stake in Verizon Wireless in March 2014, BNY Mellon, as depositary bank, distributed almost $17 billion to Vodafone DR holders, making it the largest corporate action by value involving DRs.
BNY Mellon acts as depositary for more than 2,800 American and global depositary receipt programs, acting in partnership with leading companies from over 65 countries. BNY Mellon is committed to helping securities issuers access the world's rapidly evolving financial markets and delivers a comprehensive suite of depositary receipt services.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK).
*Sources: Bloomberg, BNY Mellon, and other depositary websites; all data as of June 30, 2014, except where noted.