Chinese ADRs Surpass 2007 Record, Jumping 50% in 12 Months

  • Previous record came after a five-year, 500% advance
  • The ADR index lost 70% of its value after its 2007 peak

Chinese ADRs are back on top -- and what a ride it’s been.

For the first time in more than a decade, an index that tracks American depositary receipts of Chinese companies surpassed its previous record, helped by a stronger currency. It capped a 12-month, 50 percent surge that left the Bank of New York Mellon index at 696.21, exceeding the prior top of 693.53 set on Oct. 31, 2007.

Sound like a big gain? Not hardly. Eleven years ago, Chinese ADRs had jumped almost 500 percent in five years -- and 48 percent in just the prior two months. The nausea-inducing ride came to an abrupt end when then-Premier Wen Jiabao put on hold plans to let mainland investors buy Hong Kong stocks. As worries of a global economic slowdown began to spread, the ADR index lost 70 percent of its value in the next year.

China Miracle

The BNY Mellon China ADR Price Index has recovered to its pre-financial crisis high

Source: BNY Mellon, Bloomberg

Note: The BNY Mellon China ADR Price Index is a capitalization-weighted index that tracks all Depository Receipts from China and Hong Kong listed on NYSE and NASDAQ.

A host of factors have supported the gains, said Ilya Feygin, senior strategist at WallachBeth Capital. Chinese banks have plenty of liquidity and are getting upgrades by U.S. brokers. In addition, capital outflows are less of a problem and Chinese economic data so far this year have proved to be stronger than expected.

So if you’re worried about a bubble, go right ahead. But at least mainland investors can now buy Hong Kong stocks. That rule change came about in 2014 -- a full seven years after people were expecting it to happen.

— With assistance by Gilbert Xu, and Elena Popina

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