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Unprecedented Dr Liquidity in 2008 According To J.P. Morgan Report


Trend toward Sponsored Level I ADR Programs Anticipated for 2009; More DR Programs from Non-Traditional Markets Also Expected

New York - Depositary receipts (DR) reached unprecedented levels of liquidity in 2008 and are expected to be strong globally in 2009, according to a J.P. Morgan year-end report published today. In the first 11 months of 2008, DR trading volumes increased 53% compared to the same period last year, reaching 131 billion DR shares. During the same period, DR values increased 28% to $3.9 trillion. Additionally, U.S. investment in non-U.S. equities increased to an all-time high of 24% of total equity holdings* vs. 21% in 2007.

Other key findings from J.P. Morgan’s annual DR report include:

* New DR programs were created by 93 issuers during the first 11 months of the year, increasing the total number of sponsored DR programs to 2,125.
* GDRs (Global Depositary Receipts) represented 92% of IPO (initial public offering) capital raised during the first 11 months of 2008, while ADRs (American Depositary Receipts) represented 8%.
* Companies from “BRIC” (Brazil, Russia, India, China) nations dominated new DR programs, representing 53% of new DR issuers in 2008, and 52% of capital raised in DR form.

Capital raised in DR form globally fell markedly to $14.5 billion in the first 11 months of 2008, as compared to $57.3 billion for the full-year 2007, and $42.6 billion in 2006. The J.P. Morgan report also shows that U.S. institutional investors currently hold $765 billion in DR form, down from $850 billion in 2007. Nonetheless, the current level is more than twice the amount held five years ago, when the value of institutional DR holdings was $309 billion.

“Not surprisingly the DR market has not been immune to the overall global financial crisis; as our figures demonstrate, new sponsored DR issuances are down markedly and capital raising activity has decreased substantially,” said Claudine Gallagher, global head of J.P. Morgan’s DR business. “At the same time, however, we have seen tremendous volume in the DR market, particularly in the last three months, and we have a very solid queue of issuer IPOs ready to launch once the global markets are less turbulent.”

Regional Trends in 2008

* Asia -- the DR continued to be an attractive means to raise capital, with 88% of the primary and secondary DR offerings from established DR markets in this region, such as India and China. Solar energy was the most dominant sector in Asia in terms of capital raising, accounting for 41% of total DR offerings, all as secondary offerings.
* Europe and the Middle East -- DR capital raisings were dominated by Global Investment House of Kuwait, which raised $1.15 billion in GDRs through its IPO on the LSE. Another notable new entry from the Middle East was Commercial Bank of Qatar, which raised over $690 million. Russia remained a key market in Europe, as GlobalTrans Investment raised almost $500 million in DRs, the world’s third-largest IPO in 2008. Commonwealth of Independent States countries accounted for 11% of global capital raised via DRs.
* Latin America -- Brazil remained the dominant DR market, which represented four out of nine DR entrants for the region. All capital raisings from the region came from Brazil in 2008, most notably Vale’s secondary offering of $11.6 billion ($3.9 billion of which was raised via ADRs). There was also renewed interest in Colombia, with three new ADR programs in 2008, although none were launched for capital raising.

Market Outlook for 2009

* “BRIC” countries will continue to be key players in the DR markets.
* Renewed interest is expected from the Middle East markets. Other non-traditional DR markets, such as Vietnam, are expected to emerge.
* The global DR market is likely to trend toward sponsored Level I ADR programs. New SEC rules now make it easier for non-US companies to set-up Level I programs, which provide a platform for these companies to raise capital in the U.S. (via Level III ADR programs) when funding needs arise.
* An increase in M&A transactions using ADRs as acquisition currency. Recent transactions indicate that many non-U.S. companies are viewing the U.S. as an attractive opportunity to acquire companies at deeply discounted values. To date, GDRs have never been used as acquisition currency.
* Continued evolution of “Local DR” structures, i.e., DRs that are used to tap equity investors in markets such as Hong Kong and India. These DRs provide locally-denominated investment vehicles for investors in such markets.

For market information on DRs and international equities go to J.P. Morgan’s award-winning web site For more information on J.P. Morgan’s DR services please visit

JPMorgan Chase & Co. (NYSE: JPM), is a leading global financial services firm with assets of $2.3 trillion and operations in more than 60 countries. The firm is a leader in investment banking, financial services for consumers, small business and commercial banking, financial transaction processing, asset management, and private equity. A component of the Dow Jones Industrial Average, JPMorgan Chase & Co. serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan, Chase, and Washington Mutual brands. Information about JPMorgan Chase & Co. is available at

* Source: Federal Reserve, October 2008


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