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Over USD14bn raised by corporate issuers using depository receipts in 2011, says JP Morgan

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Despite difficult market conditions driven by sovereign debt concerns in Europe, slowing economic growth concerns in the US, and rising inflation in emerging markets, depositary receipts (DRs) remained resilient in 2011 with 54 issuers raising over USD14bn via DR IPO or follow-on offerings, according to J.P. Morgan’s DR 2011Year in Review report. In addition, DR investors drove trading volumes to record levels in the first 11 months of 2011.
 

While tough market conditions forced several issuers to put off their capital raising plans until 2012, 40 new issuers raised USD7.1bn in the first 11 months of 2011 through IPO listings in New York, London, Luxembourg, Hong Kong and Singapore, as compared to 72 issuers raising USD6.9bn in the same period of 2010. In addition, 14 existing issuers raised USD7.5bn via follow-on offerings in the first 11 months of 2011 compared to 21 issuers raising USD13.4bn during the same period in 2010.  “BRIC” countries (Brazil, Russia, India and China) continued to dominate capital raising, accounting for more than 76% of IPO capital raised and 70% of follow-on capital raised. The DR IPO markets in China and India had 13 and 17 IPOs respectively, nearly half their record 29 and 32 IPOs in the first 11 months of 2010. 
 
DR trading volume hit a new record, increasing 16% in the first 11 months of 2011 compared with the same period of 2010. The volume of DRs traded in the first 11 months of 2011 was 160bn DRs versus the same period in 2010 when volume was 138bn DRs. The value of DRs traded in the first 11 months of 2011 was USD3.6tn compared with USD3.2tn in the same period of 2010, reflecting a 12% increase even as the MSCI World Index and MSCI Emerging Market Index fell 8% and 20% respectively during this period.
 
“The year-on-year growth in DR trading volume and value shows the continued popularity of depositary receipts with issuers and investors even during a challenging year in the global capital markets,” says Dennis Bon, global head of J.P. Morgan’s DR business. “It’s also encouraging that local DRs in markets such as Hong Kong and Brazil continued to expand in 2011 while early-stage markets in the Middle East, Nigeria and Mongolia prepare for expected growth in 2012.”

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