Depositary Receipt Investors Seek Growth Outside U.S.

July 12, 2010 ( - American and global depositary receipt (DR) trading volume increased 8.3% to 78.1 billion DRs during the first six months of 2010, according to BNY Mellon.

In addition, during the first six months of 2010, $1.84 trillion of DRs traded on U.S. and non-U.S. markets and exchanges.  Both figures are all-time highs, according to a BNY Mellon press release.  

As of March 31, 2010, according to statistics released in June by the U.S. Federal Reserve, the total amount of U.S. investment in equities increased 52.8% year-on-year to approximately $21.2 trillion, while the value of U.S. investment in non-U.S. equities (both DRs and non-U.S. shares) increased 62.8% to about $4.2 trillion, the announcement said.  In addition, non-U.S. equities accounted for 19.6% of all equity investment in the U.S. – an increase from 17.1% at the same time last year.  

The number of available DR programs rose to 3,214 from 3,096 a year ago, largely due to recent changes in U.S. regulations that make it easier to establish over-the-counter-traded ADR programs.  At the mid-year mark, companies from 19 countries had established 64 new sponsored DR programs in total.  

Industrywide, DR programs for issuers from 76 countries were available to investors.

The number of DR capital-raising transactions was significantly higher than the 13 at the mid-year mark last year.  In the first half of 2010, issuers from nine countries completed 44 new primary and follow-on DR offerings, raising more than $4.1 billion.  India and China together accounted for 34 of the offerings and more than half the total value raised.

The BNY Mellon ADR Index was down 15.76% year-to-date and down 9.92% compared to a year ago.  In total, 30 of the 35 DR country indices were lower year-to-date.

U.S.-listed programs accounted for nearly 90% of all DR trading value worldwide.  The major U.S. stock exchanges — the New York Stock Exchange (NYSE) and NASDAQ — remained the largest markets for DR trading; 66.4 billion U.S.-listed DRs, valued at $1.65 trillion, traded on U.S. markets during the first half of 2010.  Compared with 60.7 billion DRs, valued at $1.17 trillion at mid-year 2009, this represents an increase of 21.6% in DR trading volume and an increase of 29.1% in DR trading value, year on year.  

According to the London Stock Exchange (LSE), 9.5 billion DRs valued at $152.4 billion traded on that market at the half-year mark, 13.1% higher and 56.2% higher, respectively, year-on-year.    

Over-the-counter (OTC) and other DR trading value totaled nearly $40 billion.