2013 First Half Heralds a Return of Global Company IPOs on U.S. Exchanges, Says BNY Mellon's DR Market Update

Jul 22, 2013

Capital-raising nearly triples, dominated by Asia; 33 new sponsored DR programs to date

NEW YORK, July 22, 2013 — U.S. exchanges have seen a return of companies from around the world eager to tap American investors via initial public offerings, according to BNY Mellon's Depositary Receipts 2013 Midyear Update.

The first six months also saw a recovery in DR capital raising, which nearly tripled over levels of a year ago. More than $3.6 billion was raised through 20 transactions, compared with $1.25 billion in the same period last year. Companies from Asia-Pacific accounted for almost half, raising more than $1.67 billion in capital.

LightInTheBox, the online retailer co-founded by a former Google China executive, represented the first Chinese IPO completed in the U.S. this year and jumped 17.5% on its NYSE debut1. Electronic payment processor, QIWI, mounted the first offering of DRs by a Russian-based company on NASDAQ while also listing its DRs on the Moscow Exchange. In addition, UBIC became the first Japanese company to raise capital in the U.S. since 2009 when it listed DRs on NASDAQ in May.

"Taken together with the record highs reached by U.S. markets earlier this year, these initial public offerings may be seen as 'green shoots' for a recovery in emerging equities that have been depressed by low interest rates for some time," said Christopher M. Kearns, CEO of BNY Mellon's Depositary Receipts business. "Savvy global companies continue to gauge market and investor sentiment carefully, and many are eager to broaden their shareholder base through the convenience and reach of DRs."

Key highlights

Thirty-three new sponsored programs were established through June, with BNY Mellon acting as depositary for 20 of those. DRs typically represent non-U.S. ordinary shares and trade on traditional and over-the-counter markets and stock exchanges. There are now almost 3,700 DR programs available to investors globally, compared with about 3,500 last year.

Overall, about 72 billion DRs traded in the first half of 2013, 10% fewer than the same period a year ago. DR trading value of $1.26 trillion was down 16% from 2012, largely driven by exits from emerging markets. The report shows North American investors - the world's biggest DR holders - reallocated funds away from international equity to domestic stocks, reducing their DR holdings by 8.9% year-on-year.

On a regional basis some interesting trends arose, mainly suggestive of investor rebalancing. Trading in Mexican DRs grew as a share of total Latin American volume as Brazil's share shrank, reflecting the reversal in fortunes as Brazil's economy slows and Mexico enjoys relative buoyancy2.

Detailed first half highlights include:

  • The top 10 DRs in terms of price performance include a 293% leap by China's Lentuo International, 180% gain by the U.K.'s Thomas Cook, followed by Denmark's Vestas Wind Systems (+146%), Taiwan's Himax Technologies (+118%), and then South Korea's Hanwha SolarOne (+107%), Flamel Technologies of France (+103%), Japan's Fuji Heavy Industries (+97%), Australia's Novogen (+94%), as well as Japan's Sony (+91%), and China's YY Inc., which gained 88%.
  • The BNY Mellon Classic ADR IndexSM Series, which tracks the performance of depositary receipts by country of origin, showed Japan leading with total returns of 16%, followed by Switzerland (+10%), Netherlands (+3.5%), and France (+2%), while the index for Germany gained 1.9%.
  • As noted, there were 72 billion DRs valued at $1.26 trillion traded globally, representing declines of 10% and 16%, respectively, compared with last year.
  • Western Europe saw more than 23 billion DRs traded valued at $493 billion, followed by Latin America where there were 19 billion traded in the first half with a total of $312 billion, Asia Pacific had almost 15 billion DRs worth almost $290 billion change hands, Eastern Europe saw nearly 12 billion DRs bought and sold in transactions totaling $121 billion and the Middle East and Africa, where 2.5 billion DRs traded almost $41 billion.
  • The most active industries were Commercial Banks with 11.4 billion DRs traded, valued at $135 billion, followed by 10.8 billion Oil and Gas DRs traded at $203 billion, Metals and Mining issuers with just over 9 billion DRs traded at $158 billion, 7.9 billion Communications Equipment DRs traded at $31 billion, followed by Semiconductor issuers trading 5.7 billion DRs totaling $70 billion.
  • Mobile phone carrier Vodafone proved the enduring popularity of DRs among investors by reaching one billion DRs outstanding.

BNY Mellon ADR Index Performance

The two best-performing BNY Mellon country indices were those consisting of DRs from companies in Japan and Switzerland, returning 16% and 10%, respectively.

As for top-performing individual companies, China's automobile distributor Lentuo enjoyed a fourfold gain in its DR price in the first half of 2013, while those of U.K. travel agent, Thomas Cook, almost tripled. The majority of the top-ten performers were technology companies, according to the BNY Mellon Classic ADR IndexSM Series and S&P Dow Jones indices. These include Denmark's Vestas Wind Systems, Taiwan's Himax Technologies and China's Hanwha SolarOne, whose DRs more than doubled in price, along with French specialty pharma group Flamel Technologies. Japan's Fuji Heavy Industries and Sony, as well as Australia's Novogen and China's YY Inc., saw nearly a doubling in their DR price.

To view BNY Mellon's 2013 Midyear Update, including video and interactive analysis, please visit:
For Windows/PCs:  http://www.adrbnymellon.com/files/MS37869.pdf
For Apple IOS devices: http://www.adrbnymellon.com/files/MS37868.pdf

BNY Mellon acts as depositary for more than 2,700 American and global depositary receipt programs, acting in partnership with leading companies from 68 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. Learn more at www.bnymellon.com/dr.

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, 2013, BNY Mellon had $26.2 trillion in assets under custody and/or administration, and $1.4 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). Learn more at bnymellon.com, or follow us on Twitter @BNYMellon.

  1. First Chinese IPO of 2013 Delivers Decent Pop, Wall Street Journal, June 6, 2013
    http://blogs.wsj.com/moneybeat/2013/06/06/first-chinese-ipo-of-2013-delivers-decent-pop/?mod=WSJ_qtoverview_wsjlatest&mod=wsj_valettop_email
  2. Brazil's Fiscal Spending Fails to Translate into Growth, Financial Times, June 13, 2013
    http://www.ft.com/intl/cms/s/0/0ce213e8-d42f-11e2-a464-00144feab7de.html#axzz2WgYHU4Wi

This release is for informational purposes only. BNY 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.