asx adr whitepaper

8/6/2019 Asx Adr Whitepaper

1/13

Market InsIghts

t imp aDr lii liqidi

By Prfessr Alex Fr, Elsa D Marc ad Dr Adrew Lepe

September 2009 Edit ion 28


2/13

IntroDuctIon

I i dii M Ii, P alx Fi, D. adw Lp d

eli DiM m Fi Diipli uii sd xmi

imp liqidi idi ami Dpi rip pm.

ti w ili iil lii dmi liqidi.

o i, I mmd m i wi wi p

qi d l i di.

rd

rid Mp

gl M, eqi M

asX Limid

the coMPany

a wld p 10 lid x p, md i m pilii,

asX p w d m ali s ex Limid d

sFe cpi Limid, ldi mp sd F ex.

t asX p ( p d dd ali sii ex )

i d d il i p p ali ldi ii d

dii m. t asX p ild ali s ex Limid, sd

F ex Limid, d al Limid. asX p qi, i ,

mmdi d m d ll lii, di, li,

dpi, lm d m d i.

I di dmi d iil m m i i lidii, p, im , di , d m, d d, cta,

ppi d il d w qi pil mi, i d pi

di i asX , wll i asX pid m

p, pi, l p l d pm m ili.

M imi asX d wi www.asx.com.au


3/13

P a g e 3M a r k e t I n s I g h t s s e P t e M b e r 2 0 0 9

eXecutIve suMMary

ti pp imp ami Dpi rip (aDr) pmm ii

mp. uilii dil d d 122 i ali id aDr, i p id 1983-2008,

i pp pill xmi liqidi aDr ii mpi.

ti d dm impm i liqidi llwi d ami Dpi

rip (aDr). spill w d :

The reduction of proportional bid-ask spread for active ADR companies is more than double that of

mpi l .

Similarly, the increase in turnover for active ADR companies is more than double that of comparative

l .

OTC-traded ADRs have a more signicant effect on the overall change in liquidity than exchange-traded

.

The time interval between listing and trading may be delaying the potential benets of issuing an ADR.

t imp aDr lii liqidi

Prfessr Alex Fr, Elsa D Marc ad Dr Adrew Lepe


4/13

1. Idi

c-lii d -lii i d lid mp d i i;

ami Dpi rip (aDr) pmm i md -li. I i d

-lii, m dii d d i i , pill i liqidi.

addiill, xp ll mpl pl mp, ldi

id iiili, l llwi d mdi . b l aDr i.

tdi i i m m d ii i iill diid

pli; l i d i i d. addiill i

imi impd ll lii lii m dd 1. F i-dp li

-lii il d li mi, kli (1998) d ez l. (1999).

ti pp w pjd il i imp

aDr pmm asX lid mpi. uilii dil d d 122 i ali id

aDr, i pid 1983-2008, i pp pill xmi i liqidi i mm di i aDr mm.

2. W ami Dpi rip?

Dpi ip (Dr) w id JP M i 1927. o p dd Dr pmm

id mmm ali i; mi m ppl m ii id

m m. Fi 1 dm w i aDr i. Fm 1983 2008, 141 aDr2

id. t m id aDr dld di pid 2002-2008, dmi

li i llii d i di ld diid pli. a li dili ali

aDr lii i w lld m b nw y (www.d.m) d JP M wi

(www.d.m).

Figure 1: Australian ADR Listing Trend 1983-2008. [Source BNY and JP Morgan].

P a g e 4 M a r k e t I n s I g h t s s e P t e M b e r 2 0 0 9

1 r si 2 dili d ll ll lii qim.

2 bw 1983 d 2008, 19 i d-lid (m d-lii mp, qii i mp d-lii aDr).

Year

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

OTC Exchange Traded

0

2

4

6

8

10

12

14

16


5/13

a dpi ip i dl qi im wi p ldi i i. t llw

mpi pil ppi xpd pi xp iil pil m.

Dr pmm d ami Dpi rip (aDr) wi llw mpi

id uid s ami pil gll Dpi rip (gDr), wi

pid mpi wi ppi pil id i dmi m. Dr pmm

i im i, llwi iil diii wi pi m

iil x.

Dr pd -pd. spd Dr pmm pdmi m ii.

cmpi i pd Dr pm ili dpi m i

li. t l i pd Dr pmm id:

Spsred Leel 1 ADR: Ll 1 Dr pmm dd otc M (.. Pi). t

im impl m ii i us pil m ll sec ii d

pii gaaP p qim p lii.

Spsred Leel 2 ad 3 ADR Prrammes: Ll 2 d 3 pmm x lid im (..nasDaQ, nyse aMeX). t i i pmm qi d us dil

lii d sec ii. t pim di w w pm i w d

xii pil dli i Ll 3 Dr, wil Ll 2 Dr pmm xii pil.

SEC Rle 144A: cpil i id pi plm Dr i wi qlid iiil

, il i pmid i i. Pi plm Dr pmm

li Ll 1 pmm d qi sec ii. t d Pl Q m.

Figure 2: Composition of Australian ADR Programmes [Source BNY and JP Morgan]


81%

6%

13%

Level 1 (OTC)

Level 2 & 3 (Exhange Traded)

Private Placement (Portal)


6/13


3. W F Liqidi?

Liqidi i wi ii d ld i m wi iil i

pi. Liqidi i il ii x. a liqidi

( m) i, ill i; i id iiili xiid

ii/di i id- pd i i ( mii ).

t qi i; i qi m m (ali) m aDr3, will liqidi i

d.

Pi aDr pmm imp liqidi d w ppii

m m d dd l ii m, dpdi pil li. rl d

mi m l l m; i aDr ld ii -pm

i pi m, wil dlpd m m id l.4 I i widl pd

mi m lw ll i, ii, li, pii d i

i. Lii i m piid m i m aDr i il pil mp, mpi li Ll 2 3 aDr mpl wi m i pi

li. r w i i ll l d i wdd; i, ddiil

l i ddd x dd aDr m mi i. ali i piid m

i ld i pi dd d impm i iiili wi mi

m.

4. D

t imp ii aDr asX lid mp, d m 122 i ali id

aDr w d. t d lld m blm id d aDr w dd,li pi, id d q, dil i d lw pi d dil lm. ti imi w d

ll llwi d ipi ii:

Proportional Bid-Ask Spread (PBAS): the bid-ask spread is the amount by which the asking price exceeds

i (id) pi. t ppil id- pd i d l ii i pi

d im. t ppil id- pd i lld llwi qi:

Turnover: Turnover is calculated by summing the trade value of all trades executed on a day. Turnover is used

i i d (id lm) m li w p i xil dd lw-pid .

t = Pi x vlm

Volatility: Volatility, a measure of risk, is calculated by taking the logarithm of the proportion of the high and

lw pi d .

F mpl, l i aDr mpd l . cl w

ld id d m pilii i aDr . I w

id did mpl , m wi mpi m pilii w ld.

t wi lid aDr m ali l mp, bhP billi, mll-p . D

l ii i mpl mpi, dil di il djd m d dd

dii; mi w d i m l, llw mpi. t ml ii

3 eqi i m m i spd Ll 1 & 2 d Pi Plm Dr pmm. spd Ll 3 pmm

mii w d xii qi.

4 s Mill, 1999; F & kli, 2000; Did l., 2004

Pbas =pi-idpi

(pi+idpi)/2

vlili = lhi

Lw[ ]


7/13

il i lld i dil i m m m. t m

m i d pid, widw.6 ti m pid i i

i id m d lii aDr.

F dipi ii, ml m i lld d d. t

d d i i d i d aDr dd i us m. t -di

d llw di i i mpl di i m

m.

5. rl

appdix 1 p mm l i aDr d i l .

5.1 ai aDr rl

Fi 3 dpi di i ml Pbas aDr lid d l . o pid,

Pbas id 0.13361 dd dii d 0.05498 dd dii, pil, i 6

m di d.

Figure 3: Standardised Proportional Bid-Ask Spread Comparison

t xii imil dlpm i liqidi. o , aDr lid id

0.129991 dd dii mpd 0.05884 dd dii l i 6

m llwi di d Dr pm. Fi 4 ill id i i

ml d i i m.

Figure 4: Standardised Weekly Turnover


6 t widw i ix m d -di d i aDr.

Before After

ADR Control

-0.3

-0.25

-0.2

-0.15

-0.1

-0.05

0

Intervals (Week)

-0.6

-0.4

-0.2

-0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

0

-0.05

-0.1

-0.15

-0.2

-0.25

-0.3


8/13

t liqidi il ll iill ii 1% ll. t l pid id

i aDr pill imp liqidi i m m (tl 1 i

appdix p mm ii).

Pi di F (2002), Did (2004) d amd (2006) p -lid ali

, i i pl i mill. rl i d plll di. o

pid, lili id 0.1425 dd dii i aDr mpd 0.02091

dd dii dli i l . I i d i aDr d l ,

lili i iill ii.

5.2 Dmpii Lii tp

ti i i i di d p lii. a did i si

2, x dd aDr i Ll 2 d 3 Dr pm, wil o--c aDr i

Ll 1 d Pi Plm Dr pm. rl l otc di ll l.7

al x dd aDr mll p l, dw w

i idd pid l ii i.

tl 2 (appdix) mmi liqidi otc ex idd. t ii

Pbas did i si 5.1 i did otc . t Pbas otc i 0.15822

dd dii, wil x dd i 0.0307 dd dii. I i d

iil ii l i otc . ex dd iill

ii i xpl pw il i mw limid.

o pid i i i pd otc . otc 60%

i i , ilid i tl 1; otc i l mpid

i -ii. Impl, l i iil ii.

5.3 e D

ali w dd i aDr lii d d -di d d. rl

( pd) idi d l d lii d. siill, di

lii d ii l d -i w liil. t

-di d ( did i l si 5.1 d 5.2) dm , m

iill ii m. Liwi, oxd Mi, pi im ili -

di d d. up iii i w l ld m m

mm di i i aDr. ti i pill dli pii m il m

lii aDr ( did i si 5.1 d 5.2).

6. cli

t ll l lii aDr imp liqidi d iiili m. t

di i Pbas i l pi di i i , fi impd i

m wl. ali p- d p- lii d d -di d l liqidi

imp i pid d d aDr d i usa. cidi dl i di

m , di d i di m pill ld d m.

Fill imp li i dw m pi otc d ex dd . Pi

di did mi i l x dd aDr pm otc . ti

d piid m, d us li d ll sec ii i il dd. otc pm x dd , i l mplx aDr

l ddd m.


7 I i d x dd 13% ld mpl.


9/13

aPPenDIX

Table 1

DESCRiPTivE STATiSTiCS (ACTivE ADR SToCk AnD ConTRoL SToCk RESuLTS)

ti l p dipi ii (ddid ppil id- pd, ddid d

ddid lili) i ali aDr d cl . F il,

ddid m d mdi, mdi d i m i pd.

ActiveADRStocks ControlStocks

PanelA:6monthResults(3monthbeforeandafter)

Before After Before After

Standardised PBAS

Mean -0.13962 -0.27323 -0.04361 -0.09859

Median -0.37478 -0.49862 -0.26890 -0.32310

Mean Change -0.13361 -0.05498

Median Change -0.12384 -0.05420

T-Stat -9.04 -3.79

(


10/13

Table 2

DESCRiPTivE STATiSTiCS (LiSTing DiFFEREnCES)

ti l p dipi ii (ddid ppil id- pd, ddid d

ddid lili) i ali aDr . tl 2 diii aDr w otc

(otc d Pl) d ex tdd (nw y s ex, nasDaQ d ami s

ex). F il, m, mdi d i m i pd.

OTCADRStocks ExchangeTradedADRStocks

Before After Before After

Standardised PBAS

Mean -0.12832 -0.28654 -0.21397 -0.18327

Median -0.34715 -0.49862 -0.49026 -0.49827

Mean Change -0.15822 0.03070

Median Change -0.15147 -0.00801

T-Stat -10.00 0.74

(


11/13

reFerences

- amd k, kim J, h D, Iil -lii ali m: a i dmi li

qi , Jl Mliil Fiil Mm, vl. 16, 2006, p494-508.

- Did c, kli a d slz r, W i m lid i us w m?, Jl

Fiil emi, vl.71, 2004, pp205-238.

- ez v, h k d h M, c gi m Iil Diii aid Wi

tdi ad, Jl Fi, vl. 54, 1999, p2075-2107.

- F r, hd a, sd s, Iil -lii wd m liqid m: imp

dmi m, Jl Mliil Fiil Mm, vl.12, 2002, p365-390.

- F sr & kli a, t l- pm ll qi i, t Jl Fiil

d Qii ali, vl.35, n.4 (D, 2000) pp499-528.

- kli a, W mpi li i d? a id d i mil

implii, Fiil M, Iii d Im, v.7n.1, J 1998, nw y.

- Mill DP, t m i iil -lii: id m dpi ip, t

Jl Fiil emi, vl.51, 1999, pp103-123.

- www.d.m

- www.d.m

- www.xdmi.m

P a g e 1 1M a r k e t I n s I g h t s s e P t e M b e r 2 0 0 9


12/13

contact DetaILs

austraLIa

Rchard Mrphy

gl M, eqi M

+61 2 9227 0720

[email protected].

Edde gree

M, Lii d cpil a

+61 2 9227 0519

[email protected].

asIa

Adrew Msrae

ril M, ai

+61 2 9227 0211

[email protected].

north aMerIca

Dad Mtchell

ril M, n ami

+1 312 788 3363

[email protected].

euroPe

James keeley

ril M, ep

+44 203 167 4784

[email protected].

generaL InForMatIon

Dmi Imi Li: 131 279

Iil Imi Li: +61 2 9338 0000

hd asX Limid

ex c

20 bid s

sd nsW 2000 ali

tlp +61 2 9227 0000

www.asx.com.au


13/13

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