Investor demand for international securities saw capital raising in depositary receipts (DRs) increase more than three-fold to over US$38 billion globally in 2014 compared to previous year. This is its highest level since the 2008 financial crisis.

 

Asia-Pacific overwhelmingly dominated activity with 32 DR programmes raising nearly US$33 billion. Driving this increase was the significant rise in new capital raising transactions with two of the largest transactions in terms of DR value traded originating in China. Chinese companies accounted for more than a third of the new capital raising transactions, with online retail giant Alibaba raising US$25 billion from the largest initial public offering (IPO) in history.

 

BNY Mellon estimates that full year 2014 trading volume will rise 6% to 152 billion DRs, based on statistics thus far. DR trades for the full year of 2014 are estimated to be in the region of US$3.2 trillion, a 25% increase compared to 2013, making this one of the most active years on record.

 

“With the backdrop of a stronger US equity market and the improved global market sentiment, the level of capital raising activity seen in China and Asia exceeded all expectations, particularly in the technology sector,” notes Neil Atkinson, Asia-Pacific head of BNY Mellon’s depositary receipts business.

 

He added: “What we find interesting is that the technology sector, particularly social media and in e-commerce, is maturing in China and indeed Asia as a whole. We see this having an effect on the more traditional sectors of the economy including real estate, education and finance, with a number of start-up firms disrupting these sectors, developing online platforms for sectors that previously were not online. ”

 

China led the way in terms of new programmes in 2014, but BNY Mellon believes there is strong potential in other parts of Asia, namely India and Taiwan which are giving investors greater accessibility via regulatory reforms.

 

Global highlights of 2014 include:

 DR capital raising of over US$38 billion, from 56 transactions, across 19 countries. This compares to US$10.4 billion from 51 DR transactions across 20 countries in the whole of 2013

 

 The top five companies in terms of DR value traded in descending order were Alibaba, Baidu, Petrobras, Qihoo 360, and Vale

 

 The top sectors by volume traded were oil and gas (23.7 billion), banks (19.5 billion), and metals and mining (17.3 billion)

 

 The top five countries by value traded were China (US$804 billion), Brazil (US$408 billion), UK (US$393 billion), Russia (US$201 billion) and Netherlands (US$95 billion). The top five countries by volume traded were Brazil (37.2 billion), China (24.6 billion), Russia (17.8 billion), UK (9.7 billion) and Mexico (5 billion)

 

 Institutional DR ownership is up by more than 7% to US$53 billion (Q3 2014 compared to Q3 2013)

 

 The BNY Mellon Classic ADR IndexSM Series, which tracks the performance of depositary receipts by country of origin, showed India with the highest projected total annual return at +35.6%, followed by Israel (+30.9%), Indonesia (+23.7%), Argentina (+23.2%) and Denmark (+19.3%)

 

 By industry sector, the BNY Mellon Classic ADR IndexSM Series had healthcare leading with total annual returns of 11.3%, followed by technology (10%), and utilities (8.7%)

 

 Investors were able to invest in a record 3,757 DR programmes for companies from 80 countries