Depositary Receipt Trading Volume Increases Nearly 60%, Approaching Two Trillion Dollars in 2006, According to The Bank of New York Year-End Report
NEW YORK, January 16, 2007 -- Unprecedented levels of trading and capital raising, as well as consistently strong investment performance globally, highlighted overall activity in the American and global depositary receipt (DR) markets in 2006, according to The Bank of New York’s annual year-end report.
"Cross-border investing reached new heights in 2006 and significant increases in most depositary receipt metrics were clear highlights for the year," said Christopher Sturdy, executive vice president and head of The Bank of New York’s Depositary Receipt Division. "The continued globalization of the world’s equity portfolios drove extraordinary levels of DR trading and investment in both U.S. and non-U.S. markets."
Nearly $1.9 trillion of DRs traded on U.S. and non-U.S. markets and exchanges during 2006, an increase of 58% year-on-year. Issuers from 25 countries -- the large majority emerging markets -- completed 129 new primary and follow-on DR offerings, raising a record $44.5 billion. Industry-wide, a record 1,985 sponsored DR programs from 76 countries with a market value exceeding $1.2 trillion are now available to investors.
Other highlights of the report include:
- DR liquidity reaches unprecedented levels -- The year’s overall DR trading value represents an all-time high, surpassing the previous highest level set in 2000 by 25%.
- DR capital raisings surge on the strength of non-U.S. IPOs -- During 2006, companies from 27 countries established 137 new DR programs and many involved a capital raising.
- 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 $3.5 trillion as of September 30, 2006, an increase of 25% from the same time last year.
The full results of The Bank of New York’s year-end report follow.
DR Liquidity Reaches Unprecedented Levels
This year’s overall DR trading value represents an all-time high, surpassing the previous highest level set in 2000 by 25%. 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 79% of all DR trading value worldwide. A record 52.6 billion DRs valued at $1.5 trillion traded on the U.S.-listed markets during 2006, compared with 39.2 billion DRs valued at more than $1 trillion at year-end 2005, which represents increases of 34% in DR trading volume and 50% in DR trading value year-on-year. Issuers including Petrobras, BHP Billiton, Mittal Steel and Anglogold Ashanti all saw their DR trading value more than double during the year.
European-listed DR trading growth now represents nearly 16% of worldwide DR trading value, up from less than 10% one year ago. The London Stock Exchange (LSE) reported that $295 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 the year-end, IOB trading value was 123% higher year-on-year. Most of this increase can be attributed to Russian issuers, who comprised eight of the ten most actively traded IOB DR issuers. Russian oil company Lukoil saw its trading value grow 128% to $74 billion during the year 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 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 500% to become the second most actively traded in the world at $69 billion.
Other DR trading, primarily DRs traded over-the-counter on the Pink Sheets and on PORTAL, comprised an estimated $80 billion in trading volume. Of note were the Level I DR programs of Switzerland’s Nestlé and Roche Holding and Japan’s Nintendo, which all traded more than $1 billion in DRs on the Pink Sheets.
DR Capital Raisings Surge on the Strength of non-U.S. IPOs
During 2006, companies from 27 countries established 137 new DR programs and many involved a capital raising. Initial public offerings completed on non-U.S. stock exchanges in the form of GDRs drove DR capital raising statistics to new highs in 2006. As noted earlier, issuers from 25 countries completed 129 new primary and follow-on DR offerings raising $44.5 billion in 2006 -- 37% higher than 2005’s totals of $32.5 billion in 109 new DR offerings.
Two major initial public offerings sold significant amounts of DRs in their transactions. In February, Korean retailer Lotte Shopping listed on the LSE with the largest-ever DR capital raising valued at $3 billion. This transaction was surpassed in August by the offering of Russian oil company Rosneft, which completed its IPO on the LSE raising more than $6.3 billion in DRs.
Asian emerging market issuers were responsible for two-thirds of 2006’s transactions, raising $18 billion using DRs. Indian issuers completed more than 30% of all capital raising transactions in 2006, continuing a three-year trend as the world’s most active country, although the average deal size remains modest. Excluding Infosys Technologies’ $1.6 billion NASDAQ-listed follow-on offering, the average size of each transaction from India’s DR issuers was $61 million, a 10% increase from 2005. Twenty-nine of the year’s new Indian issuers chose to list on the LuxSE, two listed on the Dubai International Financial Exchange (DIFX), two on the LSE and one on the NYSE. Issuers from China successfully completed 12 capital raising transactions with DRs and seven were IPOs. Among the prominent IPOs were Home Inns & Hotel Management, which closed the year as the third best performing IPO in all of the U.S.-listed markets, Melco PBL Entertainment, Mindray Medical, Solarfun Power and Trina Solar. In Taiwan, DR issuers completed ten offerings, highlighted by a $958 million follow-on offering by NYSE-listed Chunghwa Telecom and the NASDAQ-listing of Himax Technologies. In the Asian developed markets, the NYSE-listed follow-on offering by Japan’s Toyota Motor and the new over-the-counter DR by Australia’s Westfield Group were notable.
In the Emerging Europe, Middle East and Africa markets, Russian companies dominated DR capital-raising statistics. In addition to Rosneft, seven other Russian companies: Severstal, COMSTAR United TeleSystem, TMK, Sistema-Hals, Cherkizovo Group, Chelyabinsk Zinc Plant and JSC Open Investments, completed DR placements raising more than $10.8 billion combined. A significant corporate action also utilized DRs. In July, Norilsk Nickel spun-off Polyus Gold, resulting in the creation of more than $3 billon of DRs for the new company. In Kazakhstan, five issuers including Halyk Bank, Kazkommertsbank and KazMunaiGas, raised more than $3.6 billion in initial and follow-on offerings. Elsewhere in the region, issuers from Egypt, Lebanon, Romania, South Africa and Ukraine successfully completed DR capital raisings. Also, the LSE listing of Bank of Georgia was notable as the first DR program from that country.
In Latin America, Brazilian issuers led with 11 initial and follow-on offerings. Of note were the NYSE listings of TAM and Perdigão, as well as the 144A offering of Gafisa. In Mexico, two airport operators completed U.S.-listed IPOs, Grupo Aeroportuario del Pacífico on the NYSE and Grupo Aeroportuario del Centro Norte on NASDAQ. In Argentina, the NYSE welcomed Banco Macro and Ternium, the country’s first true IPOs since 1998.
In Western Europe, mergers and acquisitions using DRs were a clear highlight. In November, France’s Alcatel and Lucent Technologies of the U.S. announced the completion of their merger. In the transaction 880 million new Alcatel-Lucent DRs valued at more than $11 billion, were issued to former Lucent shareholders. Elsewhere, September’s merger of giant steel companies Mittal and Arcelor created Netherlands-based Arcelor-Mittal, and in May, French oil and gas company Total spun-off of chemicals company Arkema. In the U.K., four issuers including Barclays Bank, Lloyds TSB, and Royal Bank of Scotland, raised more than $4 billion using DRs in specialty transactions. New over-the-counter traded DRs in the region included U.K’s Experian Group, Sweden’s Husqvarna and Diamyd Medical, and Germany’s MorphoSys.
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 $3.5 trillion as of September 30, 2006, an increase of 25% 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 18.3% of all equity investment in the U.S., up from 15.8% at the same time last year.
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 17.8% year-on-year and exceeded $1.2 trillion at the end of the third quarter 2006, an all-time high. Investment values in U.S.-listed DRs totaled $770 billion on September 30, 2006, a jump of 17.2% from the same time last year. Overall value of investment in European-listed DRs was estimated to be $240 billion and investment in over-the-counter-traded and other DRs was estimated to be $170 billion.
Among DR issuers, oil companies comprise five of the six largest programs. BP’s DR program, valued at $67.4 billion, remains the world’s largest by a significant margin. Russia’s Lukoil and Gazprom, U.K.’s Royal Dutch Shell and Brazil’s Petrobras, along with Mexican telecommunications company America Movíl, comprise the remainder of the top six. Together these issuers represent more than $234 billion in DR investment.
Non-U.S. Stock Exchanges are the Preferred Listing Markets
During 2006, 76 new DR programs from issuers located in 18 countries were listed on U.S. and non-U.S. stock exchanges. This is a slight decrease from 2005’s figures when 79 new listings reached the markets. Overall, 836 DRs are currently listed on U.S. and non U.S. stock exchanges, an increase of 7% from 2005 figures.
A historically low number of new DRs completed a listing on one of the major U.S. stock exchanges during the year, continuing a trend that began in 2001. In 2006, 21 new DR listings were completed, 8 fewer than the prior year. Of the NYSE’s 13 new listings, DR issuers included four companies from Latin America and three from China. Four of NASDAQ’s seven new DR listings were from China. In total, 478 DRs were listed in the U.S. at year end, a decrease of seven programs from 2005.
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 2006, 55 companies completed new DR listings on international exchanges, four higher than 2005’s number. This activity brought the number of DRs listed on international stock exchanges to approximately 358, an increase of 15% from 2005.
Building on last year’s trends, companies from India accounted for the majority of new stock exchange listings. For 2006, 31 new listings were from Indian companies -- more than 40% of all new DR stock exchanges listings globally. In a repeat of last year, more than 75% of the new Indian issuers chose to list their DRs on the LuxSE.
BNY ADR Index Closes at an All-Time High, Outperforming U.S. and International Indices
Overall DR performance, as tracked by The Bank of New York’s ADR Composite IndexSM, posted impressive returns during 2006. On December 29, 2006, the Index closed at 203.84 on a total return basis, up 27.4% year-to-date and an all-time high. All three of the regional sub-indices, all 15 of the market, sector and select sub-indices and 36 of 38 country indices were higher in 2006. The most impressive regional and sector results were returned by the Latin America Index, up 41.1%, and the European Telecom Index, up 36.2%. Among the country indices, Argentina, up 84%, Russia, up 80.1% and China, up 78% were among the top performers.
The Bank of New York’s Composite ADR Index soundly outperformed many major U.S. domestic and international market indices. As of December 29, 2006, the Dow Jones Industrial Average was up 13.3% on a total return basis for the year while the broader Standard & Poor’s 500 Index gained 15.8%. Internationally, the broadly-followed MSCI EAFE Index was up 26.9% on a total return basis while the narrower Citigroup World ex-U.S. Liquid DR Index was up 23%.
Among individual DR issuers, China Life Insurance, Mexico’s Grupo Simec, and Russia’s Rostelecom were the year’s best-performing ADR Index constituents, each returning more than 200%. An additional 14 constituents returned more than 100% during the year including Italy’s Fiat, U.K.’s Corus Group, and China’s Ctrip.com.
At the year-end mark, the Composite ADR Index had 423 constituents and a free float market capitalization, as defined by Dow Jones & Company, in excess of $7.1 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 |
Y-T-D Increase |
| The Bank of New York Composite ADR Index | 203.8 | 27.4% |
| The Bank of New York Latin America ADR Index | 361.5 | 41.1% |
| The Bank of New York Europe ADR Index | 209.1 | 29.1% |
|
The Bank of New York Asia |
178.7 | 21.4% |
|
The Bank of New York Emerging |
324.3 | 37.0% |
|
The Bank of New York Developed Markets |
155.0 | 26.1% |
The Bank of New York Proves its Leadership
During 2006, The Bank of New York solidified its depositary leadership position across a broad range of metrics acting as depositary for 64% of all new and successor DR programs, 61% percent of all DR capital raising transactions and 51% percent of the year’s DR trading value.
The Bank continues to attract experienced DR issuers. During 2006, seven issuers including the U.K.’s HBOS, Mexico’s Wal-Mart de México, Norway’s Tomra Systems and Ireland’s CRH, switched their DR programs to The Bank of New York from its competitors. Overall, 173 issuers have now switched 210 DR programs to The Bank of New York from other depositary banks since 1990.
In total, The Bank of New York acts as depositary for 1,271 American and global depositary receipt programs, a 64% market share, acting in partnership with leading companies from 62 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.
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1 Research Approach: The total value of investment in DRs 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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