Demand for non-US equities continued on a strong trajectory as global issuers raised US$10.4 billion in depositary receipts (DR) during the first half of 2019, an increase of 25% from the first half of 2018, according to an industry report from Citi Depositary Receipt Services.

The rise in DR capital raisings was driven primarily by increased activity in the Asia-Pacific region, with total capital raisings of US$8.1 billion – around 78% of the total pool – compared to US$6.5 billion in the first half of 2018. DR follow-on offerings increased 125% to US$6.1 billion, representing 58% of the total DR capital raised in 2019. China-based issuers raised a combined US$6.6 billion, accounting for 63% of the total.

Among these issuers, Huatai Securities, a Nanjing-based financial services company and pilot client of the Shanghai-London Stock Connect, raised US$1.7 billion in its June IPO – the largest DR IPO in 2019, with Citi serving as the depositary bank. In addition, Pinduoduo lnc., a Chinese e-commerce platform, conducted a US$1.6 billion follow-on offering – the largest DR secondary offering in the first half of 2019.

The trend of Emerging Growth Companies (EGCs) raising capital continued in the first half of 2019, with 8 of 10 China-based issuers choosing to come to market via the JOBS Act. Enacted in 2012 to assist small emerging companies to access capital in the US, the JOBS Act modified capital raising regulatory requirements for a new category of issuer known as an EGC (defined as an issuer generating less than US$1.07 billion in gross annual revenue).

Of the JOBS Act IPO DR deals in the first half of 2019, EMEA-based issuers accounted for approximately 40% by number of deals.

“Citi maintained our leading position of DR IPO activity in the first half of 2019,” says Nancy Lissemore, global head of depositary receipt services at Citi. “The continued growth of DR capital raising activity demonstrates that the DR structure remains an attractive vehicle of choice for issuers to access financial markets.”

Other Notable DR market highlights in the first half of 2019 include:

•   The internet and oil & gas sectors accounted for 44% of the total DR trading value.

•   Software & services, financials, and consumer discretionary accounted for 57% of the total DR capital raised.

•   16 issuers completed IPOs by way of the JOBS Act versus 13 in the first half of 2018.

•   Unsponsored ADR programs from China and Japan accounted for 46% of the total unsponsored trading volume.