American depositary receipts have posted impressive figures in the first half of this year. According to Citibank, total dollar-value trading has risen by 18%, from $272.3 billion to $320.7 billion; there has been a 31% rise in shares traded, from 6.7 billion to 8.8 billion; and total capital raised has increased from $4.2 billion to $7 billion. It sounds like an extraordinary success, especially in view of the fact that many of the companies that have set up ADR programmes come from emerging markets and are seeking to extend the pool of equity capital they can tap beyond the shallow local markets.
The details behind this rosy data are more complex and controversial. Since their introduction in 1927 as instruments to enable non-US companies to sell their equity to US institutional and retail investors, ADRs have regularly had to face up to market volatility. In the 1990s, after steady growth in the first half of the decade, the market peaked in 1996 when 189 new programmes were launched. But over the past three years the annual number of new programmes has been constantly declining and in 1999 could hit the lowest level since 1992.