This will be the year of Euroland’s Club Med countries and Canada, which will replace the BRICS.
The American Depositary Receipt market is doing well for banks and underwriters according to Citigroup. Not however as well for investors.
In 2013 companies (mostly from Russia, Taiwan, and China), raised $10.5 bn with ADR and global depositary offerings, primary and secondary. About 54% of the issues were initial public offerings. The total of capital raised fell 16% from levels of 2012 for lower-rated companies having less appeal.
The number of unsponsored ADRs trading hit 1,575, a 4 year high. Depositary banks like unsponsored ADRs because they can collect higher fees than with sponsored ones.
There are measures being considered by some of the emerging markets countries to ease regulations limiting DR issues, which may go some way toward offsetting the market uncertainties caused by Euroland plots to impose a financial transaction tax on trading in shares issued by Euroland companies, bought or sold by Euroland shareholders, or using brokerages or banks from the EU as intermediaries in the trading.
While the main vehicle for global diversification remains mutual and exchange-traded funds, the ADR market has also achieved a place in the panoply. In 2013, despite all the negatives, traded volume of 14.7 bn shares remained virtually unchanged from 2012, although there was a bit of a cheat involved, as the price levels of the most heavily traded ADRs was lower last year.
If the move into European markets last year continues, it should help the ADR market. US purchases of euro-land stocks in 2013 were at the highest yearly level since the common currency was created in 1999, according to the Financial Times. Euroland potentially can replace emerging markets as a destination for US investors looking for better growth and yields—with less interest rate, political, and other risks. Gun-shy investors should be lured into Portugal, Italy, Spain or France (where I am right now) as they shun such hotspots as Ukraine, Thailand, Turkey, Argentina, or Venezuela, and worry about the BRICS (Brazil, Russia, India, China, and South Africa). They will venture into the Club Med lands.
