If central banks and government agencies around the world can exit accommodative monetary and fiscal policies smoothly, 2010 could be a good year for capital raising using depositary receipts (DR), market participants say. Most of the new issues this year are expected to come from the BRIC countries -- Brazil, Russia, India and China. The key to a favorable market environment in 2010 will be ensuring that policy stimulus is moderated in a way that does not conflict with changes in bank capital and liquidity requirements, says Michael Cole-Fontayn, CEO of BNY Mellon's depositary receipts division. Claudine Gallagher, global head of depositary receipts at J.P. Morgan, says DR capital raisings this year will follow a similar trend to 2009, with relatively moderate activity early in the yea...
Like initial public offerings (IPO), the amount of equity capital raised using depositary receipts (DR) dried up during the global financial crisis, but there has been a flood of new DR issues in recent months, and companies around the world are expected to make active use of the DR capital market in 2010, market participants say. Banco Santander (Brazil) holds the record for the world's largest IPO for the year to date, with its $8 billion offering in October, which was also the largest ever by a company based in Latin America and the largest offering by any foreign company on a US exchange so far this year. More DR issues are likely from the big emerging markets, including Brazil, India and China, in such sectors as online gaming, healthcare and hospitals, and online education. India ...
A record of more than 72 billion American and global depositary receipts changed hands in the first six months of 2009, an increase of 14% from the same period a year earlier, according to The Bank of New York Mellon. A total of 194 now sponsored end sponsored DR programs for issuers from 32 countries were established in the first six months of this year, the bank said. The US-listed market remained the largest DR trading market by far in the first half. the New York Stock Exchange and Nasdaq accounted for 90% of all DR trading worldwide.
I examine several possible explanations for why Infosys' Depositary Receipts (DRs) trade at significant premiums to the equivalent underlying domestic shares. I find that a limited supply of DRs and a downward-sloping demand curve, significant transaction costs associated with investing directly in the domestic market, and trend-chasing by smaller and potentially uninformed investors partly explain the DR premiums. I also examine the wealth effects of non-capital raising secondary depositary receipt offerings by Infosys Technologies and find significant wealth transfers from existing DR holders to selling domestic shareholders who are comprised significantly of Infosys' founders.
To: BUSINESS EDITORS Contact: Dori Flanagan, +1-212-815-2291, dori.flanagan@bnymellon.com or Joe Ailinger, +1-617-722-7571, joe.ailinger@bnymellon.com, both for The Bank of New York Mellon
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