Alibaba provides bumper year for depositary receipts

The $25 billion (€20 billion) initial public offering (IPO) of Chinese internet giant Alibaba helped cause a tripling in the amount of depositary capital raised this year.

So far this year, investors have pumped a combined $38 billion into depositary receipts, which are instruments representing foreign stocks that can be traded on local exchanges. This is the highest yearly total since the financial crisis and three times the 2013 amount, according to data provided by BNY Mellon.

Helped by the Alibaba IPO, Chinese companies accounted for 82% of depositary capital raised this year, says BNY Mellon, though they only accounted for a third of transactions.

“2014 was another year of positive developments for the opening of depositary receipts markets,” says a statement from BNY Mellon. “New rules in Taiwan, India and Romania may permit new types of depositary receipt programmes. In India and Taiwan, over-the-counter non-capital-raising depositary receipts may soon provide a new channel for secondary trading in Indian and Taiwanese corporates.”

After Alibaba, the top five companies in terms of depositary receipt value this year were Chinese internet firm Baidu, Brazilian energy firm Petrobras, Chinese online security firm Qihoo 360 and Vale, a Brazilian metal and mining firm.

Depositary receipts are typically used by companies in emerging markets to access capital from major global stock exchanges, such as in New York or London.

©2014 funds europe

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