Dubai: Global capital raising through deposit receipts (DRs) more than doubled in the first half of 2014 with the Middle East region contributing significantly to the fund raising activity, according to BNY Mellon’s Depositary Receipts 2014 Midyear Update.

Depositary receipts typically represent non-US companies’ ordinary shares and trade on traditional and over-the-counter markets and major stock exchanges worldwide. As of March 31, 2014, the value of depository receipts held in the Middle East and Africa was $4.7 billion (Dh17.26 billion) which is up 15.9 per cent compared to the same period in 2013.

The Europe, Middle East, Africa (EMEA) region experienced the most trading traffic with 32.9 billion DRs traded with a value of $695.4 billion, followed by Asia-Pacific, which traded 19.3 billion DRs valued at $524 billion, and Latin America with 22.3 billion DRs traded at a value of $273.9 billion.

The first half of 2014 saw the highest level of DR capital raisings in the last three years. As of June 30, 41 capital markets transactions globally raised more than $9.1 billion, well ahead of the $3.6 billion raised through 20 transactions during the same period in 2013.

Companies from Asia-Pacific have dominated activity to date, accounting for almost 60 per cent of capital raised with more than $5.5 billion. China was responsible for nearly half of the new capital raising DR programmes, led by online direct sales firm JD.com, whose initial public offering on NASDAQ raised $1.8 billion in May.

The majority of DR transactions in the first half of 2014 were from emerging countries. TBC Bank’s listing of DRs on the London Stock Exchange represented the largest IPO ever to come out of Georgia. Brazilian telecarrier Oi raised $3 billion in the public markets, 40 per cent of which was in DR form.

“After a period marked by concern over US Federal Reserve tapering, investor sentiment is again turning to emerging markets to seek out innovative companies with which to partner,” said Mahmoud Salem, managing director, regional manager for the Middle East and head of Global Marketing for the Depositary Receipts Business.

“The vigorous return of foreign IPOs on US exchanges, using the efficiency and scope of DRs, would indicate that global firms and investors see this as a healthy marketplace with strong upside.”

The volume and value of total DRs traded rose compared to a year ago. Some 74.6 billion DRs valued at $1.49 trillion were traded globally in the first half of 2014, up 3.5 per cent and 15.5 per cent, respectively, from the first half of 2013.

Oil, Gas, & Consumable Fuels was the most actively traded sector with 12.5 billion DRs traded at a value of $226.4 billion. Banks came in second at 10.9 billion DRs traded at a value of $117.1 billion, followed by the Metal & Mining industry with 8.9 billion DRs traded and valued at $137.9 billion.

What is DR

Depository Receipts is a negotiable financial instrument issued by a bank to represent a foreign company’s publicly traded securities. A depository receipt trades on a stock exchange, but a custodian (a bank) in the foreign country holds the actual shares.

Depository Receipts bridges the gap between leading global equity markets and emerging markets by facilitating fund raising by emerging market companies in US, UK and other European markets.