Global trading in DRs falls 26 percent in 2012

DR performance outstrips S&P 500, making up for loss in 2011

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The value of DRs traded globally fell 26 percent last year compared with 2011, with the decline accelerating in the second half of the year, even as gains in the BNY Mellon ADR Index outstripped the rise in the Standard & Poor’s 500 Index, according to the year-end report of financial services company BNY Mellon.

DR trading worldwide dropped to $2.79 tn in value last year, more than 25 percent below the 2011 value, while the number of DRs traded fell 10 percent to 157 bn, says BNY Mellon.

At the same time, DRs increased 18 percent in value, outstripping the 16 percent gain in the S&P 500 Index and more than making up for a 13 percent loss for DRs in 2011, as measured by the BNY Mellon ADR Index.

‘The outperformance of the Classic ADR Index is significant, given that overall DR trading value dropped in 2012 and US stocks performed well during a year of political wrangling,’ says Christopher Kearns, deputy CEO of BNY Mellon Depositary Receipts, in a statement.

‘International portfolio diversification through DRs has offered a viable option to many investors, even as geopolitics led to periods of unsettled markets and made companies cautious about committing capital.’

Western Europe remained the world’s largest DR market last year even though value of DRs traded in the region dropped 29 percent to $1.34 bn, BNY Mellon says.

Value of DRs traded in Eastern Europe declined 5 percent to $480 bn while trading value in Asia fell 38 percent to $602 bn. DR trading value in Latin America declined 21 percent to $667 bn and fell 40 percent to $90 bn in the Middle East and Africa.

The most active over-the-counter traded DR issues included Nestlé, Roche, Gazprom and BASF, according to BNY Mellon. The most actively traded DRs on the International Order Book were Gazprom, Lukoil, Sberbank, Rosneft and Norilsk Nickel, in a Russian dominance of the top five spots.

BNY Mellon predicted an increase in DR capital-raising this year, even after capital raised through DR transactions fell 15 percent from 2011 to $13 bn and dropped 39 percent in number to 31. In 2012, transactions included Sberbank, Russia’s biggest bank, which listed on the London Stock Exchange, raising $3.5 bn.

‘In this environment, companies increasingly look beyond domestic markets and traditional financing centers for funding, and they have continued to tap international capital markets in a considerable way,’ Kearns says.

‘Our recent investor relations survey shows that half of large-cap companies from developed markets that are considering additional listings are interested in doing so in emerging markets.’