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DR capital raising more than triples in 2014, says BNY Mellon

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Investor demand for international securities pushed capital raising in depositary receipts (DRs) to over USD38 billion in 2014, more than a three-fold increase compared to the previous year. 

This is its highest level since the 2008 financial crisis. Chinese companies accounted for more than a third of the year’s capital raising transactions, with online retail giant Alibaba raising USD25 billion from the largest initial public offering (IPO) in history.
 
BNY Mellon's Depositary Receipts business forecasts that trading volume will rise 6% over 2013 levels to 152 billion DRs by year end 2014, based on statistics thus far[2]. An estimated USD3.2 trillion of DRs are expected to trade by the end of this year, a 25% increase compared to 2013.
 
“Investors continue to see DRs as a preferred option for portfolio diversification and cross-border investing, despite recent volatility in global stock markets,” says Christopher M Kearns, CEO of BNY Mellon's Depositary Receipts business. “The dramatic jump in capital raised through DRs shows that companies from around the globe rely extensively on DRs to finance their growth and expansion.
 
“It’s been another pioneering year for DRs as well with ground-breaking new rules in India, Taiwan and Romania that are helping open up these markets to increased foreign investment.”
 
DR Industry Highlights of 2014 Include:

• DR capital raising of over USD38 billion, from 56 transactions across 19 countries. This compares to USD10.4 billion from 51 DR transactions across 20 countries in the whole of 2013

• The top five companies in terms of DR value traded in descending order were Alibaba, Baidu, Petrobras, Qihoo 360, and Vale

• The top sectors by volume traded were Oil & Gas (23.7 billion), Banks (19.5 billion), and Metals & Mining (17.3 billion)

• The top five countries by value traded were China (USD804 billion), Brazil (USD408 billion), UK (USD393 billion), Russia (USD201 billion) and Netherlands (USD95 billion). The top five countries by volume traded were Brazil (37.2 billion), China (24.6 billion), Russia (17.8 billion), UK (9.7 billion) and Mexico (5 billion)

• Institutional DR ownership is up by more than 7% to USD53 billion (Q3 2014 compared to Q3 2013) 

• The BNY Mellon Classic ADR IndexSM Series, which tracks the performance of depositary receipts by country of origin, showed India with the highest projected total annual return at +35.6%, followed by Israel (+30.9%), Indonesia (+23.7%), Argentina (+23.2%) and Denmark (+19.3%)

• By industry sector, the BNY Mellon Classic ADR IndexSM Series had Healthcare leading with projected total annual returns of 11.3%, followed by Technology (10%), and Utilities (8.7%)

• Investors were able to invest in a record 3,757 DR programs for companies from 80 countries
 
2014 was another year of positive developments for the opening of DR markets. New rules in Taiwan, India and Romania may permit new types of DR programs. In India and Taiwan, over-the-counter (OTC) non-capital-raising DRs may soon provide a new channel for secondary trading in Indian and Taiwanese corporates. Meanwhile, Romanian-based companies already listed for trading on a Romanian regulated market are now able to establish DR programs in the EU, allowing them to utilize DRs for non-capital raising technical listings and secondary public offers. In addition, Trustco Group Holdings Limited launched the first sponsored ADR of any company from Namibia.
 
Globally, companies from 19 countries launched 56 capital raising DR transactions and raised more than USD38 billion. Companies in the Asia Pacific region (APAC) led with 32 DR programs raising nearly USD33 billion. Chinese companies accounted for 24 of those programs and raised USD31.6 billion. Companies in Europe, Middle East and Africa (EMEA) followed with 20 capital raising transactions raising USD3.2 billion of which two Russia companies raised USD1.3 billion. Four transactions from Latin America raised USD2.4 billion for companies in Brazil, Chile, and Colombia.
 
Companies from the EMEA region experienced the most trading traffic with 56.7 billion DRs traded valued at USD1.2 trillion; followed by Latin American companies with 44.6 billion DRs traded at a value of USD552.1 billion; and APAC companies, where investors traded 38.4 billion DRs valued at USD1.1 trillion.
 
Oil, Gas, & Consumable Fuels was the most actively traded sector with 23.7 billion DRs traded at a value of USD440.6 billion. Banks came in second with 19.5 billion DRs traded at a value of USD222.9 billion, followed by the Metals & Mining industry with 17.3 billion DRs traded and valued at USD261.4 billion, the Semiconductors & Semiconductor Equipment sector with 10.5 billion DRs traded at a value of USD161 billion, and Internet Software & Services with 9.5 billion DRs traded at a value of USD552.5 billion.
 
DR programs continue to grow, with 161 sponsored and unsponsored programs established for issuers from 37 countries through November 2014. In total, investors were able to select from a record 3,757 sponsored and unsponsored DR programs for companies from 80 countries as of 30 November, 2014. Seventy-four new sponsored programs for firms from 28 countries were established. Of those, 22 companies listed their DRs for trading on U.S. stock exchanges, three listed their DRs for trading in Europe, and 41 issuers chose to establish DR programs for the U.S. OTC market (the remaining programs trade on various other platforms). Chinese issuers established the most new sponsored programs totalling 15, followed by Australian issuers at nine. In response to continued investor and broker demand, 87 new unsponsored DR programs were created through the end of November 2014, bringing the total number of unsponsored DRs to more than 1,600 representing issuers from over 50 countries. 
 

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