PRNewswire
NEW YORK
(NYSE:BK)
Jan 12, 2009
Amid weakened economy, over 700 new DR programs established and more than $4.4 trillion in DRs traded globally, up 34% from last year
Record $3.7 trillion in DRs traded on U.S. exchanges in 2008
NEW YORK, January 12, 2009 — Record levels of liquidity and a jump in new depositary receipt (DR) programs were the highlights of the American and global DR markets in 2008, according to The Bank of New York Mellon's annual year-end report on the DR industry.
"In a year marked by unprecedented equity declines and market volatility, DRs traded at record levels of liquidity," said Michael Cole-Fontayn, chief executive officer of The Bank of New York Mellon's Depositary Receipt Division. "While DR capital raisings and DR initial public offerings (IPOs) declined, as would be expected, DRs from all regions saw a double-digit increase in trading volume due to market volatility. And with the supply of DR programs on the market greatly expanded in 2008, we expect fundamental DR investment will again pick up in 2009, led by the emerging markets."
Statistics in the report are as of December 31, 2008, unless otherwise noted. Highlights of the report include:
Further results from The Bank of New York Mellon's year-end industry report follow.
DR Liquidity Surges to Record Levels
2008's overall DR trading value reached an all-time high, growing more than 34% year-over-year to $4.4 trillion. The major U.S. stock exchanges — the New York Stock Exchange (NYSE), NASDAQ and NYSE Alternext US (formerly the American Stock Exchange) — remained the largest markets for DR trading, accounting for 84% of total DR trading value. A record 119 billion DRs valued at $3.7 trillion traded on the U.S. exchanges during 2008, representing 56% and 28% increases, respectively. European-listed DR trading value also grew strongly, with a projected $556 billion of DRs traded on the International Order Book (IOB), the primary trading platform for DRs listed on both the Luxembourg Stock Exchange (LuxSE) and the London Stock Exchange (LSE)(i). This represents a 44% increase over the 2007 total. Other trading, primarily DRs traded over-the-counter (OTC) and on PORTAL, comprised an estimated $146 billion in value.
New Programs Established from Countries Worldwide
In 2008, 707 new DR programs for companies from 47 countries were established(ii). Japan led the way with 98 new DR programs created during the year. Overall, sponsored DR program establishment was down from 2007 due to market uncertainty. Of 2008's 102 new sponsored DR programs, 32 were listed on stock exchanges -- 12 in the U.S. and 20 in Europe and Asia. Thirty-four issuers chose to trade their new sponsored DRs on the U.S. OTC market, with four of the issuers using the OTCQX platform. The remaining 36 new sponsored programs trade on various other platforms. Russian issuers established the highest number of new sponsored programs with 23 in total.
In 2008, 605 unsponsored DR programs were established, causing an unprecedented 288% year-on-year rise in unsponsored programs. Initiating the sharp increase in unsponsored programs was a change implemented in October by the Securities and Exchange Commission to Rule 12g3-2(b) under the Securities Exchange Act of 1934, which simplified the process for establishing over-the-counter American depositary receipts (ADRs). In response to investor and broker demand, The Bank of New York Mellon established 510 unsponsored ADR programs for select, eligible non-U.S. companies in 2008.
Overall, at the close of 2008, investors were able to select from more than 2,900 DR programs for companies from 80 countries.
DR Outstanding Values Decrease
The Bank of New York Mellon estimates (iii) that, in line with global markets, the total value of DRs outstanding decreased 31% year-over-year to $1.2 trillion at the end of the third quarter. Outstanding values of U.S.-listed DRs totaled more than $862 billion on September 30, 2008, while outstanding values of European-listed DRs were estimated to be $200 billion. The value of OTC-traded and other DRs was estimated at $168 billion.
As in 2007, U.S. investors held more DRs than any other investor group. According to Federal Reserve statistics released on December 11, 2008, the total value of U.S. investment in non-U.S. equities (both DRs and non-U.S. shares) decreased to $3.6 trillion in the third quarter(iv). This amount represented 18.4% of the value of total U.S. equity investment, a decrease from 20% during the same time last year.
BRIC Countries Lead DR Capital Raisings
DR issuers from 16 countries completed 41 new initial and follow-on DR offerings in 2008, raising $14.4 billion. Continuing the trend from 2007, DR capital raising transactions during 2008 were dominated by issuers from the BRIC countries. Of the 41 DR capital raisings, 26 transactions totaling $8 billion were from companies in the BRIC nations, representing 56% of the year's total value. Of the remaining 15 offerings, 10 were completed by issuers from other emerging markets.
Reflecting Market Turmoil, ADR Index Closes Down for the First Time in Six Years
Overall DR performance, as tracked by The Bank of New York Mellon ADR IndexSM, fell during 2008. On December 31, 2008, the Index closed at 102.95, down 45.82% year-to-date. Notably, three country ADR sub-indices were affected by the market downturn to a lesser extent than others: The Bank of New York Mellon Israel ADR Index was down 10.87%, The Bank of New York Mellon Chile ADR Index was down 20.45%, and The Bank of New York Mellon Denmark ADR Index was down 22.64%.
The Bank of New York Mellon Emerging Markets ADR Index, down 49.75%, outperformed the comparable MSCI Emerging Markets Index, down 54.48%.
At year end, the Composite ADR Index had 365 constituents and a free-float market capitalization as defined by Dow Jones & Company of $3.8 trillion. In 2008, The Bank of New York Mellon ADR Index reached the 10-year anniversary mark and remains the only real-time index to track all ADRs, New York Shares and global registered shares traded on the NYSE, NYSE Alternext US and NASDAQ.
In July the Bank launched The Bank of New York Mellon Russia Select DR Index, which comprises a select group of depositary receipts (DRs) from Russia. In October 2008, the Bank launched The Bank of New York Mellon GDR IndexSM and 30 global depositary receipt (GDR) sub-indices. The Bank of New York Mellon GDR Index comprises all GDRs traded on the London Stock Exchange (LSE). Also in October, the Bank launched The Bank of New York Mellon DR IndexSM, which includes all ADRs listed on the NYSE, the NYSE Alternext US and NASDAQ, as well as all GDRs that trade on the LSE.
Demand for more exchange-traded funds (ETFs) based on DRs was evidenced by the creation of the Claymore/BNY Mellon Frontier Markets (FRN) ETF, which tracks The Bank of New York Mellon New Frontier DR Index. The Frontier index was launched in May with 48 constituents representing ADRs and GDRs from 17 countries in four regions.
Index Name Close One-Year
Change
The Bank of New York Mellon Composite ADR Index 102.95 -45.82%
The Bank of New York Mellon Latin America ADR Index 202.14 -52.52%
The Bank of New York Mellon Europe ADR Index 101.90 -46.40%
The Bank of New York Mellon Asia ADR Index 95.04 -42.99%
The Bank of New York Mellon Emerging Markets ADR
Index 189.03 -49.75%
The Bank of New York Mellon Developed Markets ADR
Index 78.46 -44.86%
Regional Review: DR Trading Value Up Across all Regions
Asia-Pacific
Trading of U.S.- and Europe-listed and OTC-traded DRs from the Asia-Pacific region reached $1.27 trillion, representing more than 38 billion DRs - increases of 27% and 49% over the previous year, respectively. For the second year in a row, the most actively traded DR globally was China's Baidu.com, which traded more than $332 billion in DRs in 2008, surpassing the program's 2007 year-end total value by 23%. China's China Mobile and Suntech Power, along with Australia's BHP Billiton and Taiwan's Taiwan Semiconductor Manufacturing, were also among the region's most actively traded DRs. Japan's Nintendo, Sumitomo Mitsui Financial, Mitsubishi Corp and Tokio Marine Holdings and Singapore's DBS Group Holdings were the five most active OTC-traded DRs in the region. The region's largest DR program as measured by DR value was Taiwan Semiconductor Manufacturing, with more than $10 billion in DRs.
The region's issuers established 37 new sponsored programs and raised more than $2.5 billion in 23 DR-related transactions. Significant DR offerings included China's JA Solar's $302 million offering on NASDAQ and Japan's Mitsubishi Financial's follow-on offering of $216 million.
The March acquisition of Metal Management by Australia's Sims Group was valued at $1.5 billion and created 53 million new DRs on the NYSE. In October, China Unicom acquired China Netcom in a deal valued at $24 billion, which led to the creation of approximately 22 million new DRs valued at $297 million on the NYSE.
Emerging Europe, Middle East and Africa (EEMEA)
The EEMEA region's U.S.- and international-listed 2008 DR trading value finished the year at $820 billion, a 48% increase from 2007. Russia's Gazprom was the region's most active DR, with trading of nearly $196 billion, $188 billion of which changed hands on the LSE. The region's top five most actively traded DRs also included Russia's Lukoil, Norilsk Nickel and Mobile TeleSystems as well as Israel's Teva Pharmaceuticals. Notably, Gazprom, Lukoil and Teva were also among the top 10 largest DR programs globally.
Issuers in the EEMEA region established 39 new sponsored DR programs, including 20 that were spun off from Russia's RAO UES as part of the biggest DR corporate action in history. Issuers from the region also completed 12 new DR capital-raising transactions valued at $4.9 billion. A highlight was the May offering from Kuwait's Global Investment House on the LSE, raising $1.15 billion in DRs, the largest Middle Eastern capital raising ever in DR form and the first DR program from Kuwait. Other significant IPOs with DRs were completed by Qatar's Commercial Bank of Qatar, Russia's GlobalTrans Investment and Ukraine's MHP.
Teva acquired U.S. Barr Pharmaceuticals in a deal valued at approximately $7.3 billion. The acquisition involved nearly 69 million new DRs valued at $2.9 billion and a cash distribution of almost $4.4 billion.
Latin America
Trading of U.S.-listed DRs from Latin America totaled $1.19 trillion, growing 51% over the previous year as the region's issuers continued their strong growth in liquidity and DRs outstanding. Brazil's Petrobras (common and preferred) traded more than $340 billion by year-end while CVRD (common and preferred) traded more than $258 billion. The region's top 10 most actively traded programs also included Mexico's America Movil (A and L series) and Cemex, as well as Brazil's Unibanco, Banco Bradesco, Banco Itau and CSN, and Argentina's Tenaris. The region's largest DR issue as measured by value was America Movil (Series A and L), with nearly $32 billion worth of DRs outstanding. With $28 billion in DRs outstanding at the close of the third quarter, Brazil's CVRD (common and preferred) was the region's second-largest issue.
Latin American issuers established 12 new sponsored DR programs and completed four DR capital-raising transactions, raising more than $4.3 billion in 2008. Of note were the NYSE rights offering by Brazil's Gerdau and CVRD's follow-on offering of $2.3 billion.
Western Europe
Nearly $1.18 trillion of U.S.-listed and OTC-traded DRs from Western Europe traded in 2008, a year-on-year increase of 27%. Finland's Nokia was the region's most active DR program with $122 billion traded by year-end. The U.K.'s BP, HSBC, Royal Dutch Shell and Rio Tinto, France's TOTAL, Ireland's Elan and Germany's SAP also were in the region's top 10. Switzerland's Nestle and Roche Holding as well as Germany's E.ON AG and BASF and France's Societe Generale were the region's top five most active OTC-traded DRs, aggregating nearly $18.3 billion by year-end. The U.K.'s BP remained the world's largest DR program as measured by DR assets, with $45 billion in DRs outstanding, a 30% decrease from 2007. Other issues with more than $15 billion in DR value included the U.K.'s Royal Dutch Shell and GlaxoSmithKline, and Switzerland's Novartis.
Western European issuers established 14 new sponsored DR programs and completed two new capital-raising transactions valued at nearly $2.7 billion in 2008. Nine of the new issuers chose to trade over-the-counter, with the U.K.'s Phynova opting to list on the OTCQX platform. The U.K.'s Barclays Bank PLC listed its preference shares on the NYSE while Thomson Reuters chose NASDAQ. Germany's Evotec also listed its DR program on NASDAQ.
In January, SAP acquired Business Objects in a deal valued at $6.8 billion. Nearly $1 billion was distributed to DR holders of Business Objects to facilitate the deal.
The Bank of New York Mellon Solidifies its Industry Leadership
During 2008, The Bank of New York Mellon continued to demonstrate its DR leadership position across several key categories. Specifically, the Bank acted as depositary for 64% of all DR capital-raising transactions, 56% of all new and successor sponsored DR programs and 45% of the year's DR trading value.
In 2008, The Bank of New York Mellon continued to draw established DR issuers. Argentina's Tenaris, the U.K.'s Rexam, Japan's Komatsu, Italy's Intesa Sanpaolo and India's Himachal Futuristic all decided to move their programs and selected The Bank of New York Mellon as their successor depositary. In total, 182 issuers have switched 219 DR programs to The Bank of New York Mellon from other depositary banks since 1990.
The Bank facilitated 17 M&A transactions involving DRs during 2008. These transactions created more than 147 million new DRs valued at more than $4.8 billion and the Bank distributed nearly $8 billion to DR holders.
The Bank of New York Mellon acts as depositary for more than 1,350 sponsored American and global depositary receipt programs, acting in partnership with leading companies from 63 countries. With an unrivalled commitment to helping securities issuers succeed in the world's rapidly evolving financial markets, the Company delivers the industry's most comprehensive suite of integrated depositary receipt, corporate trust and stock transfer services. Additional information is available at www.bnymellon.com/dr.
The Bank of New York Mellon Corporation is a global financial services company focused on helping clients manage and service their financial assets, operating in 34 countries and serving more than 100 markets. The company is a leading provider of financial services for institutions, corporations and high-net-worth individuals, providing superior asset management and wealth management, asset servicing, issuer services, clearing services and treasury services through a worldwide client-focused team. It has $22.4 trillion in assets under custody and administration, approximately $1.1 trillion in assets under management and services approximately $12 trillion in outstanding debt. Additional information is available at bnymellon.com.
This release is for informational purposes only. The Bank of New York Mellon provides no advice nor recommendation or endorsement with respect to any company or securities. Nothing herein shall be deemed to constitute an offer to sell or a solicitation of an offer to buy securities. Depositary Receipts: Not FDIC, State or Federal Agency Insured; May Lose Value; No Bank, State or Federal Agency Guarantee.
Note: New sponsored DR statistics count bifurcated GDRs (i.e. those with a 144A and a Regulation S tranche) as one new program and exclude successor DR programs.
(i) Data provided by the London Stock Exchange
(ii) Data from Bank of New York Mellon and stock exchanges.
(iii) Research Approach: The total value of investment in DRs is derived by multiplying DRs outstanding by DR price. All DR price figures are publicly available from the applicable stock exchange or trading market. The number of DRs outstanding for Bank of New York Mellon-sponsored DR programs was derived from internal reporting sources. The number of DRs outstanding U.S.-listed issues sponsored by other depositaries was derived from publicly available figures provided by the NYSE and NASDAQ. DRs outstanding figures for European-listed and OTC-traded issues that are not serviced by The Bank of New York Mellon were estimated using publicly available information including, but not limited to, company reports and SEC 13-F shareholder data.
(iv) Federal Reserve Statistical Release: Z.1 - Flow of Funds accounts of the United States