Wednesday June 25 8:02 AM EDT
Company Press Release
ADR activity booms through the first half of 1997
NEW YORK--(BUSINESS WIRE)--June 25, 1997--
Emerging markets issuers overtake OECD issuers in raising new
capital in the US
Trading volumes continue to break records
ADR share prices dramatically out-gain those of US-based issuers
Trading volumes and new issuance in the American Depositary Receipt (ADRs) market continued to surge through the first half of 1997, with emerging market programs leading the way, according to a preliminary report issued today by Citibank. ADRs are U.S. securities that represent shares of a non-U.S. company and trade in the U.S. financial markets similar to the way ordinary shares of U.S. companies do.
Citibank, a leading depositary bank for issuers from around the world, noted that in comparing the first half of 1997 to first half of 1996, the amount of money raised for issuers in the emerging markets - versus for those based in developed markets - jumped dramatically. While only 38 percent of the $6.2 billion raised in last year's first half was for emerging market issuers, this year 57 percent of the $6.4 billion raised was for issuers based in the emerging markets. The Bank also highlighted the fact that the average ADR share price jumped 30 percent from 1H '96 to 1H '97, versus a gain of only 11 percent for stocks of US-based issuers.
Some of the strongest growth came from rapidly growing economies in Brazil, India, Taiwan, Indonesia, Hungary, Portugal and Russia. Many of these countries used ADRs to raise new capital to restructure existing industries and support their bid to become global players.
Rise in dollar value of trading volumes underscores investor
confidence
While the number of shares traded during the first half declined slightly - to 5.2 billion from 5.6 billion -- the dollar value of ADR shares traded through the end of May jumped 20 percent from the previous year ($211.5 billion projected for 1H '97 versus $175.9 billion actual for 1H '96), making it clear that investors are confident about the long-term viability of new market economies.
``We're seeing high levels of investor interest in new programs, as well as a steadily increasing demand for shares in previously existing programs,'' explained James Donovan, Managing Director for Citibank's Depositary Receipt business. ``The market has shaken off the effects of the peso crisis that dampened ADR interest in 1995. Investors see excellent growth opportunities going forward in ADRs, and they're looking beyond the developed markets more and more, to new areas like Latin America, Asia, Central Europe and even Africa.''
ADR share prices climbing faster than those of U.S.-based
companies
Over the last three ``First Half'' periods ('95, 96 and '97), the average ADR share price has substantially outpaced the average share price for U.S.-based issuers. Between 1H '96 and 1H '97, the average ADR share price increased 30 percent (from $31.16 to $40.46) whereas the average non-ADR share price rose just 11 percent. And compared to 1H '95 (during the Peso crisis), the average ADR share price has shot up 51 percent (from $26.87 to $40.46), versus only 22 percent for US-based issuers.
New issuance holds steady, expected to climb in 2nd half
Through the first half of 1997, 96 companies from 34 different countries had launched new ADR programs; of these, 48 used the programs to raise $6.4 billion overall. This compares with the 98 companies that introduced new programs, totaling $6.2 billion, during the first half of 1996. The United Kingdom accounted for the largest number of new issuers (15), followed by Australia (10), Brazil (6), Mexico (6) and the Netherlands (5). Banking was the most active industry sector, with 10 new issues, followed by Telecommunications (9), Mining (8), Food & Household Products (7) and Energy Sources (6).
Citibank expects to see the pace of new issues quicken during the third and fourth quarters of 1997. ``It's possible that we'll see a record-breaking year,'' said Donovan. ``The first half is always quieter than the second, because issuers wait a few months to gauge the feel and appetite of the market. With trading volumes being so strong, and the US market in general also showing real strength, I think we'll see a very active second half.''
Donovan went on to note that while ADRs continue to be a popular capital-raising tool for non-U.S. based global companies, ``even a multinational corporation must pay close attention to how the quality of its program is perceived by the US market. More and more companies, from more and more countries are launching ADR programs, so the competition for investor attention is greater.
``Companies must be creative in how they compete for this attention. Many companies launching new ADR programs ask us how they can stand out from the crowd. Our answer is to emphasize quality above all else, both in the overall presentation of your business and in your bottom-line numbers,'' Donovan said.
According to Citibank, the top 20 ADRs on US exchanges accounted for 66 percent of the aggregate US dollar value of trading for this type of security over the last five years. At the same time, these top ADRs outperformed their local markets 57 percent of the time, based on annual price appreciation returns in US dollars. ``Our studies continue to indicate there appears to be some advantage to certain companies who have listed their shares in the US market in ADR form,'' Mr. Donovan explained. ``The US market can have an uplifting effect on a company's local shares.''
Citibank began offering depositary receipt services to clients in 1928, and is a market leader in this area. In recent years, Citibank's exchange-listed ADR programs have contributed more to the growth of the ADR market than those of any other bank. With a local presence in 98 countries and unsurpassed strength in delivering on- line information, Citibank is uniquely qualified to connect issuers with investors in today's global marketplace.
Most Active ADR Programs
(Based on No. of Shares Traded,
Through May 31)
Telefonos de Mexico (NYSE:TMX) Mexico 237,180,700
Telecommunicacoes Brasileiras S.A.
(NYSE:TBR - news) Brazil 228,780,900
LM Ericsson Telephone Co (NASDAQ:ERICY) Sweden 183,982,000
ADT Limited (NYSE:ADT) Bermuda 108,970,000
Nokia Corporation (NYSE:NOKA) Finland 102,444,200
Glaxo Wellcome plc (NYSE:GLX) UK 92,794,700
Hanson plc (NYSE:HAN) UK 90,026,200
YPF Sociedad Anonima (NYSE:YPF - news) Argentina 81,434,200
Royal Dutch Petroleum Company N.V. (NYSE:RD) Netherlands 74,863,300
The News Corporation Limited (NYSE:NWSPR - news) Australia 72,508,000
Most Active ADR Programs
(Based on $ Value of Shares Traded,
Through May 31)
Telecommunicacoes Brasileiras S.A.
(NYSE:TBR - news) Brazil $24.02 billion
Royal Dutch Petroleum Company N.V.
(NYSE:RD - news) Netherlands $13.43 billion
Telefonos de Mexico (NYSE:TMX) Mexico $9.39 billion
British Petroleum (NYSE:BP) UK $7.61 billion
Nokia Corporation (NYSE:NOKA) Finland $6.41 billion
LM Ericsson Telephone Co (NASDAQ:ERICY) Sweden $6.11 billion
Unilever NV (NYSE:UN) Netherlands $5.07 billion
Smithkline Beecham plc (NYSE:SBH) UK $4.40 billion
Teva Pharmaceutical Industries Ltd.
(NASDAQ:TEVIY - news) Israel $3.43 billion
Telefonica Nacional de Espana SA (NYSE:TEF) Spain $3.33 billion
Top 10 Capital Raisings From Emerging Markets
(First Half, 1997)
Unibanco-Uniao de Bancos Brasileiros S.A. Brazil $963.6 million
Videsh Sanchar Nigam Ltd. India $447.6 million
Mol Magyar Olaj-Es Gazipari Ri Hungary $239.9 million
ASUSTek Computer Inc. Taiwan $235.8 million
China Steel Corporation Taiwan $186.6 million
Electricidade de Portugal, S.A. Portugal $180.8 million
Chemical Works of Gedeon Richter Hungary $171.3 million
Companhia Brasilieria de Distribuicao Brazil $117.0 million
VimpelCom, Open Joint Stock Company Russia $114.1 million
BPL Cellular Holdings Limited Indonesia $100.0 million
Top 10 Countries New ADR Programs by Region
(based on No. of new companies (based on No. of new companies issuing ADRs)
issuing ADRs)
No. of Africa 4
Country Issues Asia/Pacific 27
Europe 44
United Kingdom 15 Latin America 21
Australia 10 __________________
Brazil 6
Mexico 6 Total 96
Netherlands 5
France 4
Chile 4
Taiwan 4
Hong Kong 3
Sweden 3
Russia 3
South Africa 3 |
