December 21, 2010

Depositary Receipts Maintain Popularity with Issuers and Investors in 2010, According to J.P. Morgan Year in Review Report

BRIC Countries Continue to Dominate Depositary Receipt Capital Raising
Local Variations of Depositary Receipts Developed in Hong Kong, Brazil, India and Russia

NEW YORK, December 21, 2010 - Despite economic uncertainty and volatility in the global equity markets in 2010, depositary receipts (DRs) remain popular with both issuers and investors, according to J.P. Morgan's DR 2010 Year in Review report.

In the first 11 months of 2010, trading value increased 26% compared with the same period of 2009. The value of DRs traded in the first 11 months of 2010 was $3.2 trillion compared with $2.5 trillion in the same period of 2009. Trading volume for the first 11 months in 2010 was 138 billion DRs versus the same period in 2009 when volume was 124 billion DRs, an 11% increase.

Issuers raised more than $20.3 billion through primary and follow-on DR offerings in the first 11 months of 2010, compared to $17.1 billion in the same period of 2009. IPO capital-raising saw 72 new issuers raise $6.9 billion in the first 11 months of 2010 through IPO listings in New York, London, Luxembourg, Paris, Singapore or through private placements, as compared to 22 issuers raising $7.9 billion in the same period of 2009. "BRIC" countries (Brazil, Russia, India and China) accounted for 90% of total capital raised. The DR IPO markets in China and India bounced back with 29 and 32 IPOs, respectively, a new record. 2010 also saw the first DR IPOs from Russia and the Middle East since the second quarter of 2008.

"Key DR markets remained resilient in 2010. As issuers from emerging markets continue to access the U.S., Western European and Asian capital markets, we expect a steady increase in capital-raising via DRs," said Claudine Gallagher, global head of J.P. Morgan's DR business. "We've seen markets in Hong Kong, Brazil, India and Russia facilitate the creation of new local DR programs and we expect that trend to continue in 2011."

Other key findings from J.P. Morgan's "Depositary Receipts Market 2010 Year in Review" report include:

  • 108 issuers from 19 countries created new sponsored DR programs during the first 11 months of 2010, increasing the total number of sponsored DR programs globally to 2,217.

  • Total DR capital-raising was driven by the $10 billion Petrobras follow-on offering in 3Q10, the largest capital-raising event in history. J.P. Morgan acts as the depositary bank for Petrobras.

  • 21 existing issuers raised $13.4 billion in the U.S., Europe or Asia through follow-on offerings in the first 11 months of 2010, a 46% increase as compared to $9.2 billion raised by 33 issuers in the same period of 2009.

A Year of Firsts

  • 2010 saw the first-ever listing of Hong Kong Depositary Receipts (HDRs) on The Stock Exchange of Hong Kong by Vale of Brazil. J.P. Morgan acts as the depositary bank for Vale.
  • Standard Chartered raised $530 million by launching the first-ever Indian Depositary Receipt (IDR).
  • Following a BM&FBOVESPA (Brazil) regulation change in 2010, the first 20 unsponsored Brazilian DRs (BDRs) started trading in the fourth quarter. BDRs are backed by U.S. equity shares that trade on Bovespa's over-the-counter (OTC) market. J.P. Morgan expects the number of unsponsored BDRs trading on the Brazilian exchange to increase gradually in 2011.
  • In December, Russia's United Company RUSAL announced plans and filed the prospectus to create the first Russian Depositary Receipt (RDR) program, for which Sberbank will serve as the local depositary bank. RUSAL is expected to launch its RDR program in late December or early 2011.

Themes to Watch in 2011

IPO Capital Raising: A steady increase in DR capital-raising from emerging markets is expected as companies continue to access capital in the U.S., Western Europe, and Asia to meet their funding requirements.

  • Asia-Pacific is expected to be the most active capital-raising region, with China and India continuing to lead through ADR and GDR offerings, respectively, followed by Taiwan and South Korea. Vietnam and Mongolia are expected to emerge as new DR markets over the next 12 to 24 months.

  • Russia, where the government is expected to embark on a major privatization initiative, will likely lead DR capital-raising in Europe. Depending on financial market strength and stability, deal flow may also be seen from new or nascent DR markets in the Middle East, CIS (ex-Russia) markets and in Sub-Saharan Africa, particularly Nigeria.

  • In Latin America, Brazil, Colombia and Mexico are likely to see capital-raising activity in 2011, with Brazil the most active market in the region.

Local DRs: In 2011, "local DRs" should continue to evolve. (Local DRs are structured to better tap equity investors in new markets, providing local currency-denominated investment vehicles in markets such as Hong Kong, Brazil, India, Taiwan and Russia.) J.P. Morgan expects more issuers from China and Singapore to list Taiwan DRs on the Taiwan Stock Exchange. Regulatory changes in China in the next 12 to 24 months may allow foreign companies to list on China's stock exchanges.

J.P. Morgan Continues DR Industry Leadership

Having created the first-ever ADR in 1927, J.P. Morgan continued its industry innovation and leadership in 2010.

J.P. Morgan launched the first Hong Kong Depositary Receipt (HDR) for Vale of Brazil. This launch reinforced J.P. Morgan's legacy of innovation and brought the world's second-largest mining company, and the largest producer and exporter of iron ore, to the Hong Kong market. J.P. Morgan worked very closely with Vale, the Stock Exchange of Hong Kong, regulators and intermediaries in Hong Kong and overseas to make this happen. This listing is a testament to J.P. Morgan's global capabilities.

Petrobras of Brazil successfully launched a $70bn follow-on stock offering, of which $10bn was in ADR form, the largest-ever DR capital-raising event in history. J.P. Morgan was the depositary bank for this record-breaking transaction. The success of this $10bn ADR offering, together with the largest-ever $6.4bn GDR IPO for Russia's Rosneft in 2006, demonstrates J.P. Morgan's ability to execute large and complex DR transactions.

Programs managed by J.P. Morgan, on average, continue to trade at higher values and are significantly more liquid than those of other depositary banks. J.P. Morgan's sponsored DR programs see average annual trading value of $4.2 billion (versus industry average of $1.9 billion) on annual volume per program of 168 million DRs (versus industry average of 81.5 million DRs).

Additional 2010 highlights include:

  • J.P. Morgan was appointed as successor depositary bank for Danone in France and UPM Kymmene in Finland.  

  • J.P. Morgan's clients, including BNP Paribas, British Telecom, Chunghwa Telecom, Novo Nordisk, Rio Tinto, Telecom Italia, TIM Participações, Turkcell Ilet?im Hizmetleri, Volkswagen and Wipro Limited renewed or extended their contracts in 2010.

  • J.P. Morgan handled the first GDR IPO from the Middle East since second quarter 2008: Aluminium Bahrain (Alba) listed on the London Stock Exchange (LSE).

  • J.P. Morgan's depositary bank entered new markets in Bahrain, Egypt and Finland in 2010.  

To view the full J.P. Morgan "DR Market - 2010 Year in Review" report, please visit For market information on DRs and international equities go to J.P. Morgan's award-winning web site For more information on J.P. Morgan's DR services please visit

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