December 19, 2011

Over $14 Billion Raised By Corporate Issuers Using Depositary Receipts in 2011; DR Trading Volume Hits New Record While Trading Value Increased, According To J.P. Morgan Year in Review Report

Local DRs in Hong Kong Expected to Grow in 2012

NEW YORK, December 19, 2011 - Despite difficult market conditions driven by sovereign debt concerns in Europe, slowing economic growth concerns in the U.S., and rising inflation in emerging markets, depositary receipts (DRs) remained resilient in 2011 with 54 issuers raising over $14 billion via DR IPO or follow-on offerings, according to J.P. Morgan's DR 2011Year in Review report. In addition, DR investors drove trading volumes to record levels in the first 11 months of 2011.

While tough market conditions forced several issuers to put off their capital raising plans until 2012, 40 new issuers raised $7.1 billion in the first 11 months of 2011 through IPO listings in New York, London, Luxembourg, Hong Kong and Singapore, as compared to 72 issuers raising $6.9 billion in the same period of 2010. In addition, 14 existing issuers raised $7.5 billion via follow-on offerings in the first 11 months of 2011 compared to 21 issuers raising $13.4 billion during the same period in 2010.  "BRIC" countries (Brazil, Russia, India and China) continued to dominate capital raising, accounting for more than 76% of IPO capital raised and 70% of follow-on capital raised. The DR IPO markets in China and India had 13 and 17 IPOs respectively, nearly half their record 29 and 32 IPOs in the first 11 months of 2010.  

DR trading volume hit a new record, increasing 16% in the first 11 months of 2011 compared with the same period of 2010. The volume of DRs traded in the first 11 months of 2011 was 160 billion DRs versus the same period in 2010 when volume was 138 billion DRs. The value of DRs traded in the first 11 months of 2011 was $3.6 trillion compared with $3.2 trillion in the same period of 2010, reflecting a 12% increase even as the MSCI World Index and MSCI Emerging Market Index fell 8% and 20% respectively during this period.

"The year-on-year growth in DR trading volume and value shows the continued popularity of depositary receipts with issuers and investors even during a challenging year in the global capital markets," said Dennis Bon, global head of J.P. Morgan's DR business. "It's also encouraging that local DRs in markets such as Hong Kong and Brazil continued to expand in 2011 while early-stage markets in the Middle East, Nigeria and Mongolia prepare for expected growth in 2012."

Key findings from J.P. Morgan's "Depositary Receipts Market 2011 Year in Review" report include:

  • 91 issuers from 27 countries created new sponsored DR programs during the first 11 months of 2011, increasing the total number of sponsored DR programs globally to 2,280.

  • 54 issuers raised $14.6 billion through primary and follow-on DR offerings in the first 11 months of 2011, compared to 93 issuers raising $20.3 billion in the same period of 2010.

  • 40 new issuers raised $7.1 billion in the first 11 months of 2011 through IPO listings compared to 72 issuers raising $6.9 billion in the same period of 2010.

  • 14 existing issuers raised $7.5 billion through follow-on offerings in the first 11 months of 2011, compared to 21 existing issuers raising $13.4 billion in the same period of 2010.

  • London overtook the U.S. as the preferred location for DR IPO capital raising and was the source of 46% (or $3.3 billion) of the $7.1 billion IPO capital raised in the first 11 months of 2011, followed by New York at 29% (or $2.1 billion) (NYSE $1.6 billion; NASDAQ $542 million) and Luxembourg at 9% (or $648 million).

  • NYSE continued to dominate DR trading in the first 11 months of 2011, accounting for 66% of DRs traded both in terms of volume as well as value. LSE and NASDAQ accounted for 17% and 13% respectively of DR trading volume. NASDAQ and LSE accounted for 19% and 12% respectively of DR trading value in the first 11 months of 2011.

  • As was the case in 2010, oil and gas, telecom, mining and banking remained amongst the most active sectors for DR trading in both volume and value.

A Year of Firsts

2011 saw J.P. Morgan launch two groundbreaking programs on the Hong Kong Stock Exchange. In April, SBI Holdings of Japan raised $207 million in the first ever capital raising event via Hong Kong Depositary Receipts (HDRs). In December the first ever DR program for a U.S. registered entity was established for the luxury apparel designer Coach.

J.P. Morgan worked very closely with SBI and Coach, as well as with the Hong Kong Stock Exchange, regulators and intermediaries in Hong Kong and overseas to execute these deals. The listings are a testament to the firm's global capabilities and long-held tradition of innovation and product development.

Themes to Watch in 2012

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 region in terms of number of IPO deals. China and India, and to a lesser extent Taiwan, are expected to be the most active markets. New DR markets such as Vietnam and Mongolia are likely to see deals over the next 12 to 18 months.

  • Russia is expected to lead DR capital raising in EMEA while Kazakhstan and Ukraine are expected to be the other active CIS states. Deal flow is also likely from new or nascent DR markets in the Middle East and Sub-Saharan Africa.
  • Within Latin America, Brazil, Argentina, Peru, Mexico and Colombia are expected to see DR capital raising activity in 2012.

Local DRs: In 2012, some local DR structures 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.

  • HDRs will continue to develop as an alternative to ADRs and GDRs, as multinational companies with large existing sales operations in Asia or those that would like to tap into the growing pool of liquidity in Asia seek to list on the Hong Kong Stock Exchange.
  • J.P. Morgan expects more issuers from China and Singapore to list Taiwan DRs on the Taiwan Stock Exchange and also expects the number of unsponsored BDRs trading on the Brazilian exchange to increase gradually in 2012.
  • 2012 could potentially witness the much anticipated launch of the first Chinese DRs on the Shanghai Stock Exchange.

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 2011.

  • J.P. Morgan is the only depositary bank that successfully executed IPOs in New York, London, Luxembourg, Singapore and Hong Kong in 2011. Key deals include:
    • The largest non-bank DR IPO for an issuer from Russia in 2011 - Global Ports Investment Ltd's $587 million London GDR offering. Registered in Cyprus, Global Port Investment Ltd. was also J.P. Morgan depositary bank's first deal for a Cypriot registered entity.
    • The two largest DR IPOs from Taiwan in 2011 - Catcher Technology Co Ltd's $220 million Luxembourg listing and Farglory Land Development Co. Ltd's $210 million London listing.
    • The first ever HDR IPO - SBI Holdings of Japan listing on the Hong Kong Stock Exchange.
    • The largest capital raising deal from India in 2011 - Welspun Corp Ltd's $115 million Singapore listing.
    • Taomee Holdings Ltd of China's $64 million New York listing.
  • DR programs sponsored by J.P. Morgan depositary bank, on average, continue to have higher trading values and are significantly more liquid than those sponsored by other depositary banks. J.P. Morgan's sponsored DR programs see an average annual trading value of $3.8 billion (versus industry average of $1.9 billion) on an annual volume per program of 157 million DRs (versus industry average of 88 million DRs).
  • J.P. Morgan was named "Best DR Bank" by The Asset magazine for the third-consecutive year.

To view the full J.P. Morgan "DR Market - 2011 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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Neither the HDRs, nor the Hong Kong Depositary Shares ("HDSs") evidenced thereby have been or will be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be re-offered, resold, pledged or otherwise transferred in the United States or to, or for the account of, a "U.S. person" (within the meaning of Regulation S promulgated under the Securities Act), unless the securities are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, and hedging transactions involving the HDRs or the HDSs may not be conducted unless in compliance with the Securities Act.

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