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ADRs: Going from strength to strength

Efficient linkages between stock markets should eventually enable global investors to trade shares easily on local markets removing any need to use such instruments as depositary receipts. But such linkages are far from complete. American investors still prefer to deal in dollar-denominated paper. Foreign companies are building up their ADR programmes as a currency for US acquisitions. With the trade in ADRs in 2000 exceeding $1 trillion by September, and expected to top $1.3 trillion by the end of the year, the depositary receipt market looks set to prosper.

It is now over 70 years since the first American depositary receipt (ADR) was launched and the consensus of opinion among the market's key players is that the sector has never been in such great shape.

In the last couple of years much has been made of threats to the pre-eminence of ADRs as an investment tool for US investors, notably a move to dealing directly on foreign exchanges in foreign currency, or through such instruments as global registered shares (GRSs). But so far these threats have not been realized. New ADR programmes are constantly being launched and the value of the market is ever rising. For the time being, the ADR looks set to retain its position as the leading option for US investors looking to expand holdings in foreign companies.

Top 10 most widely held ADRs
Company Country Industry Shares Held through ADRs Value ($bn) No. of Investors Report Date
Nokia Finland Telecommunications 1.205,511,808 60.03 640 Jun-00
Royal Dutch/Shell Netherlands Oil/gas exploration/dev./svcs. 588,484,416 36.17 770 Sep-00
BP Amoco UK Oil/gas exploration/dev./svcs. 598,840,960 33.82 836 Jun-00
Vodafone UK Telecommunications 557,304,768 23 655 Jun-00
Ericsson Sweden Telecommunications 939,290,304 18.7

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