The Bank of New York Mellon ADR Index®, a widely accepted industry benchmark, was up 9.92% year-to-date and down 31.79% compared to a year ago.
"Despite incredible volatility in equity prices in the midst of ongoing global financial turmoil, depositary receipts have once again demonstrated their strength as a cross-border investment vehicle. Trading volume is higher year-over-year while trading value is beginning to rebound," said Michael Cole-Fontayn, chief executive officer of The Bank of New York Mellon's Depositary Receipt business. "Since mid-April, DR issuance has exceeded cancellation, in part because emerging equity markets have rebounded after substantial drops in 2008. The Bank of New York Mellon has retained its dominant position because it is delivering new and promising investment vehicles to the world's cross-border equity investors."
In line with global economic conditions, capital raisings were significantly lower. Issuers from five countries completed 13 new primary and follow-on DR offerings, raising nearly $5 billion. Through June 2009, companies from 20 countries established 38 new sponsored DR programs.
U.S.-Listed Market Remains the Largest DR Trading Market
The major U.S. stock exchanges - the New York Stock Exchange (NYSE) and NASDAQ - remained the largest markets for DR trading, comprising 90% of all DR trading value worldwide. A record 60.7 billion U.S.-listed DRs, valued at $1.17 trillion, traded on U.S. markets during the first half of 2009. Compared with 52 billion DRs, valued at $2.1 trillion at mid-year 2008, this represented an increase of 14% in DR trading volume and a decrease of 44% in DR trading value year-on-year. The most actively traded U.S.-listed DRs included Brazil's Petrobras and Vale, Taiwan's Taiwan Semiconductor Manufacturing, Finland's Nokia and Mexico's Cemex.
According to The London Stock Exchange, 8.4 billion DRs valued at $97.6 billion traded on the International Order Book (IOB) at the half-year mark, 4.3% lower and 67% lower, respectively, year-on-year. The IOB is the primary trading platform for both LSE- and Luxembourg Stock Exchange (LuxSE)-listed DRs. Of the top 10 most actively traded programs, seven were from Russia, including Gazprom, Lukoil and Norilsk Nickel. India's Reliance Industries, Kazakhstan's KazMunaiGas Exploration Production and Korea's Samsung Electronics were also among the top ten most actively traded.
Over-the-counter (OTC) and other DR trading value totaled more than $32.1 billion. The most active OTC-traded DR issues included Switzerland's Nestle and Roche, Japan's Nintendo, and Russia's Gazprom and Lukoil.
Total Non-U.S. Investment Value down 39% Year-Over-Year
As of March 31, 2009, according to statistics released in June by the U.S. Federal Reserve, the total amount of U.S. investment in equities decreased 39% year-on-year to approximately $14 trillion, while the value of U.S. investment in non-U.S. equities (both DRs and non-U.S. shares) decreased 49% to about $2.4 trillion. At the same time, non-U.S. equities accounted for 17.1% of all equity investment in the U.S., a decrease of 3.4% from the same time last year.
The largest U.S.-listed DR programs were Brazil's Petrobras with nearly $36 billion in investment, the UK's BP and Royal Dutch Shell with nearly $35 billion and $21 billion, respectively, and Israel's Teva with nearly $32 billion.
Asia-Pacific Region Leads DR Capital Raisings
During the first six months of the year, 13 initial and follow-on DR offerings by non-U.S. companies and governments raised nearly $5 billion. Issuers from China and India completed the most offerings, with five and three, respectively. Asahi Infrastructure & Projects, Changyou.com, ChemSpec, Duoyuan Global Water Inc, IKF Technologies, Suntech Power, Vishal Information Technologies and Yingli Green Energy raised a combined $1.5 billion on U.S. and non-U.S. exchanges.
Luxembourg's ArcelorMittal and China's Changyou.com were among the year's most notable DR transactions. Changyou.com was the year's first new U.S.-listed DR IPO on the NASDAQ, while ArcelorMittal's secondary offering raised more than $3.2 billion on the NYSE.
The UK and China Lead New DR Program Establishment
During the first half of 2009, 192 new sponsored and unsponsored DR programs for issuers from 32 countries were established, an increase of 91 programs from the same period last year. The increase is largely due to the aforementioned amended SEC regulation changes. Of 2009's new DR programs, eight were listed on stock exchanges - three in the United States and five in Europe. The remaining DR programs trade on various OTC markets.
The UK led with 32 new programs, followed by 26 from China, 24 from Hong Kong and 15 from Indonesia. Of the U.S. OTC programs established in the first half of 2009, one, Australia's CMA Corporation, chose to list its OTC-traded ADR program on the OTCQX platform.
The Bank of New York Mellon ADR Index Performance
During the first half of 2009, overall DR performance began to rebound as tracked by The Bank of New York Mellon ADR Index. On June 30, 2009, the Composite ADR Index closed at 145.98, up 9.92% year-to-date, while down 31.79% year-to-year. At the mid-year mark, the Composite ADR Index had 352 constituents and a free-float market capitalization, as defined by Dow Jones & Company, in excess of $4.2 trillion.
As the only real-time index to track all DRs, New York Shares and global registered shares traded on the NYSE, NYSE Amex and NASDAQ, The Bank of New York Mellon ADR Index has become a widely-followed international benchmark. Thirty-seven of the 39 country indices were up year-to-date, with the Russia Select DR Index and Brazil ADR Index each finishing up more than 50% year-to-date. China's Baidu was the half-year's best-performing ADR Index constituent, returning 170.52%. Other top-performing index constituents included the UK's Rio Tinto, up 74.96%, and Thomson Reuters, up 35.79%. An additional 14 constituents returned more than 20% during the past six months, including nine from the BRIC (Brazil, Russia, India, China) countries.
Demand for more exchange-traded funds (ETFs) based on DRs was evidenced by the creation of The Claymore/BNY Mellon EW Euro-Pacific LDRs ETF, which tracks The Bank of New York Mellon New Euro-Pacific Select ADR Index. This new index was launched April 1, with 112 constituents representing 19 countries from two regions.