South African mining stocks have proven popular with American investors who have already put up $37.8 billion in shares purchased from SA resource firms this year.
According to a Business Times report, 95% of South Africa’s JSE-listed companies offer American depositary receipts (ADRs) in the US, stock sold in dollars backed by the underlying shares back at home.
This number has grown from the 85 SA companies that punted their shares to Americans the year before.
Rise in ADRs
By the end of September, the total value of South African companies with ADRs in the US stood at $37.8-billion or R418 billion, representing a 6.1% rise on the previous year, reported Business Times.
While the overall performance of SA companies in the US has been flat since January, there were big rewards for Americans who picked the right shares.
For the year to date, gold mining company Sibanye is the best performer, up 74.8%. Gold Fields, the former parent company of Sibanye, was the second-best performer, up 24%.
Resources and construction companies remain particularly popular with investors, and this is contributed to a greater interest in infrastructure investment in emerging markets, according to Deutsche Bank, which also handles ADR programmes.
Boosting public profile
South African companies list their stock in the US for a number of reasons, including to boost their public profile, increase liquidity in the stock and, in some cases, raise new cash. Some of them believe it’s been invaluable, according to Business Times.
Altogether, 74 billion ADRs traded worldwide this year, of which only 1.4 billion traded in South Africa by June.
South African companies first hit on the idea of using depositary receipt programmes in the 1960s and 1970s.