Index

BNY Mellon Classic ADR Index posted 18 per cent return in 2012

The BNY Mellon Classic ADR Index posted an 18 per cent return last year, beating the 16 per cent gain by the Standard & Poor’s 500 Index of US shares and reversing a 2011 loss even as overall depositary receipt trading shrank, according to BNY Mellon’s year-end report on the DR market.

“The outperformance of the Classic ADR Index is significant, given that overall DR trading value dropped in 2012 and US stocks performed well during a year of political wrangling,” says Christopher M Kearns, deputy chief executive of BNY Mellon’s depositary receipts business. “International portfolio diversification through DRs has offered a viable option to many investors, even as geopolitics led to periods of unsettled markets and made companies cautious about committing capital.”
 
As the only real-time index to track all ADRs, New York shares and global registered shares traded on the NYSE, NYSE MKT, Nasdaq and over-the-counter, the BNY Mellon Classic ADR Index has become a widely followed international benchmark. Last year, the index gained 18 per cent, reversing a 13 per cent loss in 2011.
 
More broadly, a total 157 billion DRs were traded on the world’s markets and exchanges, 10 per cent less than 2011, but higher than the previous two years, while the value of DRs traded shrank 26 per cent to USD2.79trn.
 
The BNY Mellon Classic ADR Index returns for Europe were up more than 20 per cent last year. Overall, the best-performing country indices were those for Germany, which gained 33 per cent, Australia, which gained more than 25 per cent, followed by China with a 25 per cent rise, France returning 24 per cent, and Switzerland with 22 per cent.
 
According to the year-end report, oil and gas sector issuers led all industries in terms of volume with 27 billion DRs traded, 44 per cent more than 2011. In contrast, trading in the semiconductor and pharmaceutical sectors were down the most, 41 per cent and 27 per cent, respectively.  In terms of trading value, beverage sector companies outperformed all others with an 18 per cent increase to USD80bn, while the oil and gas industry saw a slight increase of slightly more than one per cent to USD575bn.
 
According to the Classic ADR Index, the two sectors with the largest percentage returns last year were financials and consumer goods, up 35 per cent and 24 per cent, respectively.  The two lowest-performing sectors were telecommunications and oil and gas, gaining less than three per cent and less than one per cent, respectively.
 
While 2012 was characterised by a mixture of volatility, depressed equity prices and low interest rates, China’s GDP rebounded in the fourth quarter and BNY Mellon’s forecast is for a slightly faster growth rate globally in 2013, says Kearns.
 
“In this environment companies increasingly look beyond domestic markets and traditional financing centres for funding, and they have continued to tap international capital markets in a considerable way,” Kearns says.
 
There were 31 capital-raising programmes in 2012, including Russia’s Sberbank, one of the largest DR offerings ever, as well as sizeable and innovative programs for Russia’s MegaFon and Brazil’s BTG Pactual.
 
“Our recent investor relations survey shows that half of large cap companies from developed markets that are considering additional listings are interested in doing so in emerging markets,” he says.
 

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