Depositary Receipt Trading Drops to Six-Year Low, JPMorgan Shows

Trading of depositary receipts fell to a six-year low in 2012 as concern about Europe’s debt crisis and China’s economic slowdown damped investor confidence, according to data compiled by JPMorgan Chase & Co. (JPM)

The value of receipt trading dropped 30 percent in the first 11 months of the year to the lowest level since 2006, JPMorgan said in a report. Trading volume declined 14 percent from the same period of 2011 as initial public offerings that included global depositary receipts declined.

“The capital raising environment was not great, but the activity numbers have dropped less than the broader markets, which is a good sign,” Dennis Bon, the global head of Depositary Receipts at JPMorgan, said in a telephone interview from New York on Dec. 14. “We saw a blip in the last couple of years, with a lot of activity, and now we begin to see the trend line getting back to normal.”

The value of depositary receipts traded in the first 11 months was $2.5 trillion, below the $3.6 trillion seen in the same period last year, according to the JPMorgan data. A backlog of potential IPOs in China and Russia may bolster trading of receipts next year, according to JPMorgan.

Latin America was the second-biggest market for depositary receipt trading. Brazil accounts for 75 percent by value in the region, with programs from raw-material producers Vale SA and Petroleo Brasileiro SA leading volumes in the year.

Worldwide, depositary receipt capital raising through IPOs and follow-on offers totaled $12.4 billion, the lowest value since 2004, according to JPMorgan. Fifty-two equity offerings were withdrawn or postponed in Latin America, emerging Asia and Eastern Europe this year, data compiled by Bloomberg show.

Bon expects offerings to pick up in 2013, led by Latin America and Russia.

“Russia is a large issuer, the pipeline is huge in terms of companies looking to IPO, and there’s still a lot of investor interest,” he said.

To contact the reporter on this story: Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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