Citigroup Launches Indexes Focused on Liquid DRs

Global Finance, Sep 2004

THE AMERICAS

Citigroup introduced four regional indexes that track the worlds most-liquid depositary receipts.

Known as the Citigroup Liquid DR Indices, they include only those companies that have US exchange-listed American depositary receipts or London-traded global depositary receipts that are actively traded.

"These indices put the spotlight on liquid issues and provide an excellent gauge of international investor sentiment," says Sanjeev Nanavati, managing director for Citigroup Depositary Receipt Services.

Tb be included in the indexes, US-listed ADRs are required to have a minimum value of trading of $2 million a day, and London-traded GDRs must trade at least $1 million a day. In addition, the companies that issue the DRs must have investable, or free-float, equity capital of at least $250 million.

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"These new indices are a testament to the importance we place on liquidity and our unrelenting focus on assisting companies in this regard," Nanavati says.

The indexes, which are priced daily at the end of US trading, provide a more timely measure of international investor sentiment, he says. By contrast, the widely followed MSCI regional benchmarks provided by Morgan Stanley Capital International contain ordinary shares that trade in their local time zones where markets may have closed up to 14 hours earlier than the US market closing.

According to Nanavati, Citigroup's Liquid DR Indices more completely capture global investor sentiment toward the Indian, South Korean and Taiwanese markets by including London-traded GDRs from companies in these countries that are not included in other DR indexes.

Bank of New York's and Standard & Poor's Asian ADR indexes include no GDRs and many illiquid ADRs, he says. Even a small trade of an illiquid stock can give a misleading signal to investors, Nanavati says.

Citigroup's new indexes will include the only publicly available DR indexes for the Asian Pacific region excluding Japan and for Asia-Pacific growth economies. The other regions covered by the Liquid DR Indices will be Latin America and EuroPac, which includes Western Europe and the developed economies of Asia.

The Citigroup indexes arc highly correlated to the regional MSCI benchmark indexes, but include fatfewer securities. The EuroPac index, for example, includes only 80 DRs, whereas the MSCI EAFE index has 1,006 stocks.

Citigroup has hired Standard & Poor's to calculate and maintain the indexes, which are available on Bloomberg terminals as well as the Citigroup DR home page, www.citigroup.com/adr.>