The Bank of New York Reports Significant Increases in Depositary Receipt Trading and Investment During The First Half of 2006
Global macroeconomic conditions drive activity in the international equity marketsNEW YORK, July 12, 2006 -- Unprecedented trading levels in the American and global depositary receipt (DR) markets represented the most noteworthy highlight for the first six months of 2006, according to a mid-year analysis of the DR marketplace by The Bank of New York. More than $932 billion of DRs traded on U.S. and non-U.S. markets and exchanges during the first half of 2006, up 85% year-on-year. Also during the first half of 2006, companies from 21 countries established 74 new DR programs, a 25% increase from last year’s statistics. Industry-wide, a record 1,943 sponsored DR programs from 75 countries are now available to investors.
“The first half of 2006 was certainly a tale of two quarters. Strong returns were posted globally during the first three months of the year but global macroeconomic conditions and other factors caused markets to fall sharply before finishing up modestly at mid-year,” said Christopher Sturdy, executive vice president and head of The Bank of New York’s Depositary Receipt Division. “This volatility drove extraordinary levels of DR trading in both U.S. and non-U.S. markets.”
Volatility Drives DR Liquidity to Unprecedented Levels
This year’s half-year trading value is an all-time high and is higher than all but two full-year totals, recorded in 2000 and 2005. The major U.S. stock exchanges, the New York Stock Exchange (NYSE), NASDAQ and the American Stock Exchange (Amex), remain the largest markets for DR trading, comprising 84% of DR trading value worldwide. A record 26.9 billion U.S.-listed DRs, valued at $782 billion, traded on the U.S. markets during the first half of 2006. Compared with 19.2 billion DRs, valued at more than $451 billion at mid-year 2005, the 2006 level represents increases of 40% in DR trading volume and 73% in DR trading value year-on-year.
European-listed DR trading grew even faster and now represents nearly 16% of worldwide DR trading value, up from 11% one year ago. The London Stock Exchange (LSE) reported that $150 billion of DRs traded on the International Order Book (IOB), the primary trading platform for both LSE and Luxembourg Stock Exchange (LuxSE)-listed DRs. At mid-year, IOB trading value was 188% higher year-on-year and 15% higher than 2005’s full year total.
Among DR issuers, Russian oil company Lukoil, issuer of the world’s second-largest DR program, as measured by DR market capitalization, saw its trading value grow 187% during the six-month period to rank it as the world’s most actively traded DR. Another Russian oil and gas major, Gazprom, liberalized its share structure early in the year and instantly became one of the world's largest companies as measured by market capitalization. Gazprom’s DR trading value reflected these changes and grew more than 1,100% to become the second most actively traded in the world. Also posting notable DR trading value increases were Teva, the Israeli pharmaceutical company, Petrobras, the Brazilian oil company, CVRD, the Brazilian mining company, and Cemex, the Mexican cement company.
DR Investment Values Post Strong Increases
The total value of U.S. investment in non-U.S. equities (both DRs and non-U.S. shares) increased to $3.3 trillion as of March 30, 2006, an increase of 28% from the same time last year and a record high, according to the latest U.S. Federal Reserve statistics. Non-U.S. equities now account for a record 17.2% of all equity investment in the U.S.
DR issuers continue to benefit from these cross-border investing trends. The Bank of New York estimates1 that the total value of investment in DRs increased more than 25% year-on-year and exceeded $1.1 trillion at the end of the first quarter 2006, an all-time high. Investment values in U.S.-listed DRs totaled $786 billion on March 31, 2006, a jump of 43% from the same time last year. Overall value of investment in European-listed DRs was estimated to be $235 billion and investment in over-the-counter-traded and other DRs was estimated to be $130 billion.
Among individual DR issuers, oil companies are responsible for four of the five largest programs. BP’s DR program, valued at $74 billion, remains the world’s largest by a significant margin. Russia’s Lukoil, the U.K.’s Royal Dutch Shell and Brazil’s Petrobras, along with Mexican telecommunications company America Movíl, make up the remainder of the top five.
DR Capital Raisings Surpass 2005 Mid-Year Total
Capital raising with DRs continued to rebound from the historically low levels witnessed during 2001 to 2004. During the first six months of the year, 63 new DR offerings by non-U.S. companies and governments raised $15 billion -- 27% higher than 2005’s mid-year totals of $11.8 billion in 38 new DR offerings and nearly one-third higher than 2004’s full-year total of $11.3 billion in 53 new DR offerings.
Issuers from 16 countries, mostly emerging markets, raised capital with DRs during the first half of 2006. Only two offerings were more than $1 billion during the first half, down from four at the same time last year. However, Lotte Shopping’s February listing on the LSE was the largest-ever DR offering. The Korean retailer raised just over $3 billion in a single transaction, beating last year’s $2.6 billion follow-on offering by NYSE-listed Chunghwa Telecom of Taiwan.
Nearly half of all capital raising transactions were completed by Indian issuers, with the deals generally modest in size, averaging $55 million. All of the Indian issuers chose to list their DRs in either London, Luxembourg or on the new Dubai International Financial Exchange (DIFX).
Twelve offerings were completed in the U.S. public markets, of which nine were new DR listings. Latin American companies Grupo Aeroportuario del Pacifico, Ternium, TAM and Banco Macro Bansud were among the most prominent, raising nearly $2 billion with DRs combined.
Non-U.S. Stock Exchanges are the Preferred Listing Markets
During the first half of 2006, 45 new DR programs from issuers located in 11 countries were listed on U.S. and non-U.S. stock exchanges. This is an increase of 50% from 2005’s mid-year figures when 30 new listings reached the markets.
There were ten new U.S. stock exchange DR listings during the first half of 2006, two more than last year’s mid-year figure, but still substantially lower than 2005’s full-year total of 29. The NYSE’s new DR issuers were four Latin American companies (two others were secondary preference shares), while NASDAQ’s three new DR listings were all from Asian issuers and an issuer from the U.K. completed the Amex’s only new DR listing.
International stock exchanges, which are the primary listing markets for GDRs, continued recent trends as popular listing and capital-raising markets for issuers, primarily those from the emerging markets. During the first half of 2006, 35 companies completed new DR listings on international exchanges. This number is nearly 60% higher than 2005’s half-year figure of 22 and more than 2004’s full-year total of 20. This activity brought the number of DRs listed on international stock exchanges to approximately 350.
Building on last year’s trend, companies from India accounted for the majority of new stock exchange listings. For the six-month period, 25 new listings were from Indian companies -- 56% of all new DR listings on stock exchanges globally. In a repeat of last year, most of the Indian issuers chose to list their DRs on the LuxSE although the LSE and the DIFX listed three companies and two companies, respectively.
ADR Indices Are Broadly Higher and Outperform U.S. Domestic Indices
Overall DR performance, as tracked by The Bank of New York ADR IndexSM, posted strong returns during the first half of 2006. On June 30, 2006, The Bank of New York’s Composite ADR IndexSM closed at 146.1, up 8.6%, year-to-date and up 22.2% for the past 12 months. In early May, the Index crossed 160, a six-year high and was within 8% of its all-time high, reached in early 2000. All three of the regional sub-indices and 13 of 15 market sector and select sub-indices ended higher year-to-date. More broadly, 29 of 39 country indices were up year-to-date, led by the Latin American ADR indices of Venezuela and Argentina. Also of note were increases by the China and Brazil ADR indices, up 21.1% and 14.4%, respectively. Most of the ADR indices soundly beat the major U.S. domestic market indices. As of June 30, 2006, the Dow Jones Industrial Average was up 4% for the year while the broader Standard & Poor’s 500 Index gained just 1.8%.
Russia’s Rostelecom was the half-year’s best-performing ADR Index constituent, returning more than 112%. Other triple-digit increases were posted by the U.K’s Cambridge Antibody Technology and Norway’s Petroleum Geo-Services. An additional 17 constituents returned more than 50% year-on-year.
At the mid-year mark, the Composite ADR IndexSM had 434 constituents and a free float market capitalization, as defined by Dow Jones & Company, in excess of $6.3 trillion. The Bank of New York ADR Index is the only real-time index to track all DRs, New York Shares and global registered shares traded on the NYSE, Amex and NASDAQ.
| Index Name | Close | Change |
|
The Bank of New York Composite ADR Index |
146.1 |
8.6% |
|
The Bank of New York Latin America ADR Index |
146.7 |
9.6% |
|
The Bank of New York Europe ADR Index |
140.5 |
6.2% |
|
The Bank of New York Asia ADR Index |
222.6 |
9.9% |
|
The Bank of New York Emerging Markets ADR Index |
214.5 |
7.3% |
|
The Bank of New York Developed Markets ADR Index |
115.2 |
8.8% |
The Bank of New York’s Market Leadership
In total, The Bank of New York acts as depositary for 1,248 American and global depositary receipt programs, a 64 percent market share, acting in partnership with leading companies from 60 countries. With an unrivalled commitment to helping securities issuers succeed in the world's rapidly evolving financial markets, the Bank delivers the industry’s most comprehensive suite of integrated depositary receipt, corporate trust and stock transfer services. Additional information is available at www.adrbny.com.
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in providing a comprehensive array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. The Company has a long tradition of collaborating with clients to deliver innovative solutions through its core competencies: securities servicing, treasury management, asset management, and private banking. The Company’s extensive global client base includes a broad range of leading financial institutions, corporations, government entities, endowments and foundations. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide. Additional information is available at www.bankofny.com.
1 Research Approach: The total value of investment in DR is derived by multiplying DRs outstanding by DR price. All DR price figures are publicly available from the applicable stock exchange or trading market. The number of DRs outstanding for The Bank of New York DR programs was derived from internal reporting sources. The number of DRs outstanding from non-Bank of New York sponsored U.S.-listed issues was derived from publicly available figures provided by the NYSE and NASDAQ. DRs outstanding for European-listed and OTC-traded issues that are not serviced by The Bank of New York were estimated by The Bank of New York using publicly available information including, but not limited to, company reports and SEC 13-F shareholder data.
This information and data is provided for general informational purposes only. The Bank of New York does not warrant or guarantee the accuracy or completeness of, nor undertake to update or amend, this information or data. We provide 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
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