China-based issuers raised a combined US$6.1 billion in depositary receipts (DR) in the six months to June, accounting for 69% of the total capital raised via DR during the period, according to an industry report from Citi. Shanghai-based China Pacific Insurance (Group) Co., in particular, raised US$1.9 billion from its initial public offering on the London Stock Exchange in June, the largest DR IPO capital raising during the period. It was the second-ever deal under the Shanghai-London Stock Connect.

Secondary offerings were driven by pharmaceuticals and biotechnology, raising a combined US$1.8 billion, up 39% from first half of 2019.

Despite market uncertainties, demand for non-US equities ensued with issuers raising US$8.8 billion in DR during the first half, down 25% from the same period in 2019, says the Citi report. Across the Asia-Pacific region, DR capital raisings reached US$7.0 billion, 80% of the total pool. Total IPO capital raised amounted to US$4.9 billion, while total follow-on capital raised amounted to US$3.9 billion.

Capital raising by emerging growth companies (EGCs) continued during the period, with 13 of 16 new issuers choosing to come to market via the JOBS Act. Enacted in 2012 to help small emerging companies access capital in the US, the  law modifies capital raising regulatory requirements for a new category of issuer known as an EGC (a firm defined generating less than US$1.07 billion in gross annual revenue). Of the JOBS Act IPO DR deals in the first half of 2020, China-based issuers accounted for 12 of the 13 deals and 97% of total capital raised.

Other highlights of the DR market in the first half of 2020 include:

• Total DR trading volume was up 49% while total DR trading value was up 34% compared with the same period in 2019.
• DR trading volume was highest within the banking sector with 19 billion DRs traded, while DR trading value was highest within the internet services sector with US$851 billion in DRs traded.
• Trading volume of unsponsored American depositary receipt (ADR) programmes rose 78% from the first half of 2019 to 4.1 billion, while total number of programmes dropped 1% to 1,437.
• Unsponsored ADR programmes from China, Japan, and France accounted for 51% of the total unsponsored trading volume.

“The continued DR capital raising activity demonstrates that the DR structure remains an attractive vehicle of choice for issuers to raise capital,” Scott Pollak, global head of depositary receipt services at Citi, says, adding that Citi was the depositary bank for over 40% of the DR capital raising deals in the first half.