The value of depositary receipts (DRs) traded globally dropped 22 percent in the first half of this year compared with the same period last year amid global economic uncertainty and declining trading volumes, according to financial services company BNY Mellon.
A total of $1.49 tn worth of DRs changed hands in the first six months of 2012, compared with $1.91 tn in the same period of 2011, says BNY Mellon, which is the depositary for more than 2,500 American and global DR programs. At the same time, the number of DRs traded declined to 79.5 bn from 80.5 bn.
As of June 29, BNY Mellon’s ADR Index was down 13.7 percent from a year earlier, according to BNY Mellon’s Depositary Receipts Midyear Market Review. But the index gained in the first half of 2012, rising 1.9 percent.
‘Uncertainty appears to be the only certainty and equity traders’ trepidation appears likely to continue throughout the year,’ writes Michael Cole-Fontayn, CEO of BNY Mellon’s DR business, in the report.
The first half saw ‘Greece teeter on the brink of default; a hotly contested presidential race in the US start to heat up; growth in China begin to temper; Brazil announce a $4 bn economic stimulus package to combat stagnant growth; and the European Central Bank decide to inject cash into the eurozone’s ailing banks,’ he says in the report.
‘The DR market is not immune to these economic and political shifts,’ he continues. But ‘the DR market remains significant’ and ‘investors are still using it as a reliable and efficient way to access the global markets.’
The review shows that 11 DR IPOs and follow-on transactions raised a total of $1.25 bn in the first half of 2012, with 46 new sponsored and 114 unsponsored DR programs created, making a total of more than 3,500 sponsored and unsponsored DR programs, up from 3,413 a year earlier.
The oil & gas sector led trading, with a total volume of $328 bn and 14.7 bn DRs, according to the review.
The best-performing sector was the beverages industry, with a gain of 40 percent, followed by a 4 percent increase in the diversified telecommunications sector.
The worst performing were the communications equipment sector, with a drop of 52 percent, and semiconductors, down 49 percent.
The construction materials sector registered the biggest increase in DR trading volume in the first half, with a year-on-year gain of 26 percent, according to BNY Mellon.
The second biggest increase was the 25 percent posted by the diversified telecommunications sector.
The semiconductor sector led declines with a 37 percent drop, while pharmaceuticals fell 21 percent in volume.
Despite the small change in the ADR Index in the first half of the year, several countries registered strong increases.
The BNY Mellon Mexico ADR Index rose 17.9 percent, Chile’s ADR Index gained 10.1 percent, and the Japan ADR Index increased 9.5 percent. Of the 34 country indices, 19 posted first-half gains.
The best-performing member of the ADR Index was China’s Tudou Holdings, with a gain of 205 percent, followed by China Sunergy’s 119 percent increase.
