Depositary Receipts Boost Domestic Share Prices and Liquidity for Emerging Market Companies
October 09 2007 - 10:01AM
PR Newswire (US)
New Research Highlights Value of Stock Exchange-Listed or
OTC-Traded Programs NEW YORK, Oct. 9 /PRNewswire-FirstCall/ --
American and global depositary receipt (DR) programs established by
companies from emerging markets boost their domestic share prices
and improve their home-market liquidity, according to a study
conducted by independent research firm Oxford Metrica and sponsored
by The Bank of New York Mellon. (Logo:
http://www.newscom.com/cgi-bin/prnh/20071001/NYM012LOGO ) The
research found that shareholder value rose on average by up to 20
per cent over one year and share liquidity improved by 40 per cent
over one year as a result of listing a DR program on a U.S. or
European stock exchange. Emerging market issuers that terminated
their DR programs to the over-the- counter (OTC) trading market
experienced the opposite effect, with local market share prices
dropping on average by 20 per cent over a year. The research
covered 628 DR programs from 33 countries in Asia, Eastern Europe,
Middle East, Africa, and Latin America between 1980 and 2007. The
research revealed that companies in Brazil, Russia, India and China
(the "BRIC" markets) gained the greatest benefit from launching a
DR program. (See full regional analysis below). Regional results --
stock exchange-listed DRs * 15 per cent value added in Asia * 8 per
cent value added in EEMEA * 35 per cent value added in Latin
America * 35 per cent value added in BRIC countries Regional
results -- OTC- traded DRs * 25 per cent value added in Asia * 30
per cent value added in EEMEA * 40 per cent value added in Latin
America * 50 per cent value added in BRIC countries For emerging
market companies that upgraded their DR programs from OTC- traded
(Level I) to U.S. or European exchange-listed (Levels II/III) there
were also significant benefits. On average they enjoyed 60 per cent
uplift in domestic share price value that may be attributed to
complying with stricter U.S. or international reporting
requirements and U.S. GAAP or IFRS accounting. DR programs also
boosted the companies' home-market liquidity as a result of
increased access to and visibility of the stock and the
accompanying coverage by investment analysts. Listed companies
experienced 40 per cent uplift, while OTC-traded DRs enjoyed a 48
per cent rise in liquidity. Over the last four years, DR
performance for emerging market companies has outperformed the
S&P 500 Composite Index. An investment of $100 million in the
S&P 500 between July 1, 2003 and June 30, 2007 would be worth
$155 million, while that same investment in The Bank of New York
Emerging Markets ADR Index would be worth $341 million. Christopher
Sturdy, executive vice president and head of The Bank of New York
Mellon's Depositary Receipt Division, said: "The research confirms
that establishing a DR program has significant benefits for the
shareholders of emerging market companies. Emerging market issuers
gain increased access to the global capital markets and the data
shows that their market capitalization grows accordingly. The Bank
of New York Mellon is committed to helping emerging market issuers,
investors and brokers unlock the potential of these DR programs."
Dr. Rory Knight, principal of Oxford Metrica, said: "The results of
our analysis -- which includes all emerging market DR programs
established since 1980 -- are striking. DR programs demonstrably
add value across markets, regions and type of instrument, whether
stock exchange listed or OTC-traded." Depositary Receipts, which
include American Depositary Receipts (ADRs) and Global Depositary
Receipts (GDRs) are negotiable, U.S. dollar-denominated securities
that represent a non-U.S. company's securities. DRs can be made
eligible to trade on all U.S. stock exchanges as well as an
increasing number of stock exchanges in Europe, Asia, the Middle
East and Canada. To read a copy of the research report visit
http://www.adrbny.com/. The Bank of New York Mellon The Bank of New
York Mellon's Depositary Receipt business is conducted through The
Bank of New York subsidiary, which acts as depositary for more than
1,270 American and global depositary receipt programs, 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 Company delivers
the industry's most comprehensive suite of integrated depositary
receipt, corporate trust, and stock transfer services. Additional
information is available at http://www.adrbny.com/. The Bank of New
York Mellon Corporation is a global financial services company
focused on helping clients manage and service their financial
assets, operating in 37 countries and serving more than 100
markets. The company is a leading provider of financial services
for institutions, corporations and high-net-worth individuals,
providing superior asset management and wealth management, asset
servicing, issuer services, clearing services and treasury services
through a worldwide client-focused team. It has more than $20
trillion in assets under custody and administration, more than $1
trillion in assets under management and services $11 trillion in
outstanding debt. Additional information is available at
http://www.bnymellon.com/. Oxford Metrica Oxford Metrica is an
independent research and analytics firm in international
investments. The firm focuses on risk, value, reputation and
governance -- the strategic aspects of financial performance.
Oxford Metrica aims to provide evidence-based support for key
management decisions. Oxford Metrica also provides research and
analytics to several hedge fund managers particularly those
involving emerging markets and multi-manager strategies. Additional
information on the firm is available at
http://www.oxfordmetrica.com/.
http://www.newscom.com/cgi-bin/prnh/20071001/NYM012LOGO
http://photoarchive.ap.org/ DATASOURCE: The Bank of New York Mellon
Corporation CONTACT: Jamie Brookes, +44-207-163-2146, , or Dori
Flanagan, +1-212-815-2291, , both of The Bank of New York Mellon
Corporation Web site: http://www.bnymellon.com/
http://www.adrbny.com/ http://www.oxfordmetrica.com/
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