Growing demand from global investors may spur blue-chip Middle East firms to launch depository receipt (DR) programmes, and help boost liquidity in their stocks, a BNY Mellon banker said.

'The appetite has been there, but these companies knew pricing would have been unreasonably low,' said vice-president, DRs, Peter Gotke.

Earlier this week, Egypt's largest listed company, Orascom Construction Industries (OCI), launched an American DR programme, its third DR offering.

'OCI has one of the most liquid DR programmes on the London Stock Exchange and has the chance to connect with demand in the US' Gotke said.

DRs are mostly listed in London and New York. Shares are bought in the local secondary market and then converted into DRs giving the same benefits as owning the shares, voting rights and dividends.

DRs could help foreign investors tap blue-chip names in Saudi Arabia, such as Saudi Basic Industries. Foreign buyers use promissory notes to buy shares in Saudi stocks. The notes do not give voting or dividend rights.

Gotke said DRs can boost a company's share price by about eight per cent in the first year of listing, while liquidity will rise 20 to 40pc over the period.

'By having secondary market activity, the DR and shares float higher together because each one is dragging the other one up.

'There is a perception that DRs will draw liquidity away from secondary markets, but studies have shown that the opposite is true. DRs and ordinary shares are fungible and act as a spur to local market liquidity,' he said.

BNY Mellon has been mandated by two companies in the UAE and Kuwait to issue DRs early next year. 'Both are significant names and liquid stocks locally. While additional liquidity is attractive to them, it is about broadening their shareholder base and visibility,' he said.

Global trade in DRs is up 30pc to $3.5 trillion in 2010. Emerging markets accounted for 96pc of capital raising DR programmes.-TradeArabia News Service