BNY Mellon has announced its highest level of depository receipts (DRs) since the 2008 financial crisis, with figures increasing more than three-fold from 2013.
DRs reached just over $38 billion in 2014, compared to 10.4 billion in 2013. This is partly attributed to higher investor demand for international securities.
This included 56 transactions across 19 countries, compared to 51 transactions across 20 countries in 2013.
There was also a record high in investment, with of 3,757 DR programmes for companies invested in, across 80 countries.
BNY Mellon predicts that by the end of 2014, DRs will reach 152 billion, an increase of 6 percent over 2013. The research also predicted a 25 percent increase in DR trading to $3.2 trillion.
Institutional DR ownership in Q3 2014 was $53 billion, a 7 percent increase on the same period in 2013.
Christopher Kearns, CEO of BNY Mellon's repository receipts business, said: “Investors continue to see DRs as a preferred option for portfolio diversification and cross-border investing, despite recent volatility in global stock markets.”
“The dramatic jump in capital raised through DRs shows that companies from around the globe rely extensively on DRs to finance their growth and expansion.”
China raised 82 percent of the total DR capital, accounting for 24 programmes and $31.6 billion. Of this, $25 billion came from Alibaba’s record-breaking initial public offering, which was the largest in history.
China was also the top country in terms of value traded, trading $804 billion. Brazil was second with $408 billion, followed by the UK with $393 billion.
By volume traded, Brazil led with 37.2 trades, while China was second with 24.6 billion. Russia was next with 17.8 billion trades.
The most-traded sector was oil and gas, with 23.7 trades, followed by banks, which saw 19.5 billion trades and metals and mining with 17.3 trades.
BNY Mellon’s Classic ADR Index Series tracks the performance of DRs by country of origin. It gives India the highest projected total annual return of 35.6 percent.
It also predicted that the healthcare sector will lead with projected total annual returns of 11.3 percent, followed by technology with 10 percent and utilities with 8.7 percent returns.
BNY Mellon dubbed 2014 a year of positive developments for the opening of DR markets, with new rules allowing new types of DR programmes to opened around the world. The year also saw Trustco Group Holdings Limited launch the first sponsored American Depository Receipt for a Namibian company.
Kearns said: “It’s been another pioneering year for DRs as well with ground-breaking new rules in India, Taiwan and Romania that are helping open up these markets to increased foreign investment.”
