NEW YORK, Dec. 21, 2010 /PRNewswire-FirstCall/ -- American and global depositary receipts (DRs) proved their value as a preferred vehicle for portfolio diversification and cross-border investing in 2010, surging an estimated 30% in trading value and 11% in trading volume.
BNY Mellon's Depositary Receipts business estimates that DR trading volume will rise 11% to 150 billion DRs in 2010, an all-time high(1). An estimated $3.5 trillion of DRs are expected to trade on U.S. and non-U.S. markets and exchanges by year-end, a 30% increase over 2009 and second highest total ever. New DR programs and capital raisings will finish above 2009 levels, but below historical highs of 2007.
The growing prominence of emerging markets can be seen in a continued shift in the flow of capital. According to fund tracking service provider EPFR Global, from January 1 to October 31, 2010, aggregate fund flows to emerging markets totaled $80 billion. During the same period, there was a total outflow of $118 billion from all developed market equity funds, including $82 billion from U.S. equity funds alone(2).
"Investors are using DRs as an easy, effective way to diversify their portfolio and gain exposure to equities outside their local market," said Michael Cole-Fontayn, chief executive officer of BNY Mellon's Depositary Receipts business. "The DR industry saw solid growth in 2010 in nearly every key metric – more than 150 new sponsored DR programs were created, and we expect record trading volume by year-end. Leading companies worldwide clearly continue to embrace DRs as a vital tool for their global expansion."As companies look to new markets and as new pools of investable capital emerge outside of the U.S. and Euro-zone, we're also seeing unprecedented interest in 'non-traditional' forms of DRs, such as Indian Depositary Receipts (IDRs), Brazilian Depositary Receipts (BDRs), Hong Kong Depositary Receipts (HDRs), plus other new and interesting structures," Cole-Fontayn added.