Greater China Forum and Awards content briefing
Ahead of the IR Magazine Forum & Awards - Greater China this December, we've hand picked a selection of articles, podcasts and videos that cover some of the topics we'll be discussing at the event, including ESG and reporting, global trends and Mifid II.
We hope you enjoy the content briefing! If you'd like to know more about our Greater China forum, where these topics will be discussed in depth, please click here.
Two old guys talk about millennials: Ticker 101
The week in investor relations: US-China trade talks send shockwaves through markets
The on-off trade talks between the US and China have taken another turn and appear to be headed toward a trade war. Tariffs on $200 bn worth of Chinese goods were set to intensify on Friday after the latest round of talks on Thursday evening failed to produce an agreement to avert the higher levies, reported The New York Times.
The trade talk debacle led to ramifications on stock markets, reported Bloomberg, with the S&P set for its biggest weekly drop of 2019. And CNBC noted how investors have now pulled $20.5 bn from global equity funds as a result of a breakdown in the trade talks.
Looking at the contentious issue of US-China trade, The Economist noted how the heightened trade war scenario is a major geopolitical risk and will result in economic damage for both countries.
Earlier in the week, Chinese tech and telecom stocks slumped as two tweets from US President Donald Trump – saying trade talks were ‘too slow’ and threating to put tariffs on Chinese goods – transformed the outlook on the trade talks into a much bleaker place, and sent global markets into freefall, reported Bloomberg.
Executive pay has long been a mainstream issue and something of a political football, but attempts by the UK government to deal with excessive executive pay in UK boardrooms have tanked, according to new research from the London-based think tank the High Pay Centre, reported The Guardian.
Trend-setting venture capital company Sequoia Capital China will lay off as much as 20 percent of its investment staff as a slowdown in the country’s tech sector has reduced the appetite for risk, according to Reuters. The worrying trend is borne out by the numbers: Chinese venture capital and private equity managers raised a combined $1.5 bn for investment across all sectors in the first three months of 2019, a big drop from the $9.4 bn raised in the same period last year, according to data firm Preqin.
President Tayyip Erdogan of Turkey is ready to provide full support to international investors amid something close to a financial crisis in the country, reported Reuters. The report has Erdogan saying that while attacks on the economy through its currency continued, the government was, in fact, in control of the situation. The Turkish economy has slowed recently with a currency crisis that last year wiped 30 percent off the value of the lira against the dollar.
Wall Street activist Elliott Advisors has set its sights on UK company Whitbread, according to The Sunday Telegraph. Elliott is reportedly frustrated by the leisure company’s ownership of Premier Inn hotels, which the activist says is diminishing Whitbread’s share price.
German steel giant Thyssenkrupp expects its proposed merger with Tata Steel to be blocked by the European Commission over competition issues, reported the BBC. The merger would have created Europe’s second-biggest steelmaker.
The finance director of UK vehicle breakdown service the AA has quit after a backlash from shareholders, reported The Sunday Times. The newspaper said Martin Clarke resigned after shareholders were unhappy with the company’s decreasing share price, which dates back to its IPO in 2014.
Shares in UK high street bank Metro slumped yet again on Thursday, this time by 8 percent – another new record low – based on speculation that the bank will plug investors for even more than the £350 mn ($456 mn) it said in February it would raise in a planned rights issue, reported The Times.
Britain’s economy was given a little boost in the first three months of the year, with growth of 0.5 percent, partly thanks to a massive stockpiling by manufacturers fearing the impact of a no-deal Brexit, reported The Guardian.
Asia markets flourish despite pressures
The region accounted for three of the top 10 exchanges globally so far this year, reveals EY Despite the unexciting performance of much of the global IPO market in 2019 – and specific political pressures in Asia – sentiment and trends in the region’s markets remain extremely upbeat, reveals a report from professional services firm EY.
China’s capital markets is currently going through a golden phase, especially the new, Nasdaq-inspired Star Market, which is booming.
And despite the deep unrest in Hong Kong, a great deal of focus in the financial market is on the upcoming $20 bn listing of tech giant Alibaba in a secondary float planned for Hong Kong this year.
The Asia-Pacific region dominated global IPO activity so far in 2019, despite the specter of trade tensions between China and the US.
‘By proceeds, the region accounted for three of the top 10 exchanges. Asia-Pacific’s main markets experienced average first-day returns of around 19 percent and average current returns of 34 percent, illustrating that IPO performance continues to elevate IPO investor sentiment,’ says EY in its second-quarter 2019 Global IPO Trends report.
This is despite the fact that the region’s IPO activity in the first half of this year was down 12 percent by volume (266 IPOs) and 27 percent by proceeds ($22.3 bn), compared with the same period last year.
In its report, EY notes that despite volumes and proceeds coming in lower in the first half of this year, positive investor sentiment and a healthy IPO pipeline suggest that activity in the region will pick up in the second half.
Interestingly, Thailand is also likely to see an upswing in terms of listings, with furniture retailer Index Living Mall making its debut last month.
In the April-June period, markets in the Association of Southeast Asian Nations (ASEAN) region saw a notable increase in deal numbers – 29 IPOs marking a 53 percent rise – over the first quarter of 2019 and a significant boost in proceeds ($1.7 bn for a 447 percent rise).
Key sectors that are expected to remain active and collect investor interest include technology, media and entertainment ‘as companies from these sectors are expected to drive the IPO markets in the Asia-Pacific for the rest of 2019,’ according to EY.
For sectors such as industrials and natural resources, investors might continue to limit their short-term exposure due to US-China trade tensions, while remaining focused on valuations and post-IPO performance, notes the report.
Within the Asia region, both mainland Chinese and Hong Kong IPO markets are expected to remain positive – for Chinese IPO markets, activity in the second half of 2019 is likely to be driven by the burgeoning Star Market.
For Japan’s Tokyo Stock Exchange, EY expects to see 90-100 IPOs in 2019, equivalent to 2018. However, EY does not expect any mega IPOs to hit the market. As a result, small and mid-sized companies are expected to form the bulk of IPO activity in Japan in the second half of 2019.
In Southeast Asia, EY expects the level of IPO market activity to remain quiet in the second half unless geopolitical and trade uncertainties stabilize, adding that ‘entrepreneurial companies’ are likely to dominate IPO activity.
In the first half of the year, Southeast Asia saw 48 IPOs that raised $2 bn, up 8 percent and 55 percent from a year ago, with industrials dominating the market in terms of the number of deals, followed by real estate, media and entertainment, and consumer staples.
In the first half in Malaysia, the LEAP platform, which lists small and medium-sized companies, saw the biggest volume of IPOs at 14, raising a total of $309 mn.
However, Singapore dominated the regional IPO market in the first half of the year in terms of the amount raised at $1.2 bn for eight IPOs.
Thailand’s benchmark stock index, and its Market for Alternative Investment saw nine IPOs that raised $265 mn. Indonesia accounted for the highest deal number among ASEAN exchanges in the first half, or 35 percent of regional volume, and 10 percent by proceeds.
Hong Kong companies feel heat of trade war
More than 150 Hong Kong-listed firms issue profit warnings The ongoing trade war between the US and China is having a negative impact on listed companies in Hong Kong.
An increasing number of Hong Kong-listed firms have cited the negative effects of tariffs on their business when issuing profit warnings in the last month, according to regulatory filings.
The ongoing and escalating nature of trade tensions between the two major economies has evidently hurt sentiment and appears to have caused companies to restrain future investment. In total, more than 150 Hong Kong-listed firms issued profits warnings in July, with many mentioning the macroeconomic environment as a reason for the decline in their results.
That compares with 105 profit warnings issued in January following the end of the fourth quarter and 59 profit warnings in April following the end of the first quarter, according to regulatory filings with Hong Kong Exchanges and Clearing, operator of the Stock Exchange of Hong Kong.
In the past 12 months, US President Donald Trump has placed 25 percent tariffs on nearly half of all goods imported from China, and Beijing has responded with its own retaliatory tariffs. The two countries have resumed trade talks after discussions collapsed in May, but it is an up-and-down affair.
The situation is having a big impact on smaller-segment companies, with confidence among small and medium-sized business owners in Hong Kong falling to its lowest level on record for the third quarter, according to the latest Standard Chartered Hong Kong SME Leading Business Index, which began in 2015.
‘We think the trade war has exerted pain on the Chinese economy,’ says Aidan Yao, senior emerging Asia economist at AXA Investment Managers, in a statement. ‘There are also visible spillover effects on domestic manufacturing activity, hurting business sentiment and holding back capital expenditure and hiring decisions.’
Texhong Textile Group, one of China’s largest textile manufacturers, says it expects its profits to drop by 20 percent to 25 percent in the first half of the year because of ‘macroeconomic uncertainties’ caused by the trade war.
Precision Tsugami Corporation, a foreign-owned maker of high-precision machine tools based in China, says its profit in its fiscal first quarter could fall by 40 percent to 50 percent because of ‘various macroeconomic uncertainties, including those caused by the escalating trade disputes between China and the [US].’
And Shanghai Realway Capital Assets Management, a Shanghai real estate fund and asset manager, says its profit in the first half of the year is likely to decline by at least 30.7 percent.
Bank of America Merrill Lynch economists Ethan Harris and Aditya Bhave say the probability of a deal between the US and China ‘in the next few months is dropping’.
‘While we would not rule out some kind of small de-escalation, the lack of incentives to get a deal done suggests more ups and downs but no actual deal. Moreover, whether or not there is a deal with China, we expect new fronts to open in the trade war in the coming months,’ the economists write in a research note.‘The good news is that policymakers seem ready to offset at least some of the trade war shock. The bad news is that this will require expending already low policy ammunition.’
ESG: The key to avoiding investor indifference
Institutional investors are turning their backs on companies that ignore environmental, social and governance issues ‘There is only one thing worse than being talked about,’ observed Oscar Wilde, ‘and that is not being talked about.’
For listed companies, the equivalent of this nightmare scenario is investor indifference. So-called orphan stocks languish unloved, excluded from capital and ignored by the market, left to die a slow death in an increasing spiral of anonymity.
The threat of investor indifference has become a reality in recent years, driven by the extraordinary rise of ESG investing. The tide of demand for ESG from investors is shifting to a tsunami, with tens of trillions of dollars in investment funds now earmarked solely for stocks that comply with ESG criteria. The trend has mushroomed over the past decade from modest beginnings to comprising around a third of all assets under management today – and shows no signs of slowing.
Ignore ESG, and a listed company risks being ignored by a third of global investable capital.
This mega-trend also reached the shores of the Arabian Gulf recently, when ADX, Abu Dhabi’s stock exchange, announced that it is introducing guidance for listed firms to help and encourage them to publish ESG data.
Designed to help ADX-listed companies comply with rapidly evolving ESG disclosure standards, the exchange mandates that companies submit an independent report on sustainability. ‘Companies must disclose critical environmental, sustainability and governance issues,’ its statement noted. The announcement was thin on detail, beyond saying the guidance will comprise 31 disclosure indicators, and that ADX will soon hold workshops to clarify these criteria.
Many other exchanges have taken similar steps. The World Federation of Exchanges published its ESG Guidance and Metrics in 2015. But the trend has not met with universal approval. A similar declaration by HKEX, Hong Kong’s exchange, earlier this year was greeted with resistance by the business community.
In May, HKEX proposed an obligation for listed companies to publish statements about ESG-related risks. But the Chamber of Hong Kong Listed Companies said it wants the exchange to leave disclosure to companies’ discretion, citing ‘onerous and cumbersome’ disclosure requirements. This protest is likely to fall on deaf ears when replayed to investors, which will not be sympathetic to complaints of burdensome compliance levels. Resistance to the ESG trend is bound to fail, because ESG disclosure is not a pointless tick-box exercise. It is a crucial must-have for institutional investors.
Like HKEX, the ADX has seen the writing on the wall: it understands the importance of ESG, but also understands that it is not the job of the exchange to report. That is the sole responsibility of companies.
This week, new proof arrived that investors are dead serious about ESG: MP Pension, a $20 bn Danish fund, announced it was blacklisting 10 of the world’s largest oil companies, and removing them from its portfolio. The fund concluded that these firms – including ExxonMobil, Royal Dutch Shell and Total – are carrying too much climate risk and are not being active enough in their preparation for a non-oil future.
The fund said it wanted to take responsibility for the green transition while securing long-term investment returns. Anders Schelde, CIO of MP Pension, said: ‘We do not believe this sector can deliver a return on a par with the rest of the market in the coming years.’
More action like this is inevitable: ESG compliance and data disclosure are key risk-mitigation factors for investors. As climate change, social impact and governance standards climb social and political agendas around the world, these risks are becoming ever more material.
John Bates of PineBridge Investments, an Asia-based asset manager with $97 bn under management, spoke for the industry in a recent media interview when he said: ‘Five years ago, ESG was essentially a footnote during our meetings with clients. Now, it typically forms a major segment of our meeting agendas.’
MSCI, the world’s largest provider of indices valued at more than $20 bn, sees the future as becoming increasingly ESG-focused. ESG investing is now the fastest-growing part of MSCI’s operations, and Henry Fernandez, its chairman, is on the record as saying: ‘MSCI is obsessed with becoming the world’s biggest supplier of ESG tools... there might be a point where MSCI gets defined by ESG’.
As if to prove the point, BNP Paribas announced this week that it has transformed its entire active funds range to be 100 percent sustainable: one of Europe’s largest financial institutions is now an ESG-only investor.
The momentum seems unstoppable, and the growing importance of ESG to investment decisions is uniform across developed and emerging markets: demand for corporate responsibility and disclosure is a global requirement for investors in emerging markets and developed markets in equal measure.
Companies are facing a pincer movement from both the platforms they are listed on and the investors they want to attract, and non-compliance is looking increasingly like a non-starter. But ESG compliance is not simple. In spite of the proliferation of consultants, experts and service providers, there is no single authority, no benchmark, no industry standard. Google the phrase ESG and you are offered more than 40 mn websites.
Whether UAE companies choose to do more about ESG disclosure because of the latest move from ADX, or they do so because their investors demand it, the outcome will be the same. ESG’s position as a central element of any company’s investment case is the new normal.
ADX is to be congratulated for trying to get its companies to understand and embrace this fact. With or without its help, however, companies face a future where they will have to embed ESG in their narratives, or face the capitalism equivalent of Oscar Wilde’s nightmare vision: investor indifference.
Or, as the Danish pension fund has shown this week, investors may not stop at indifference – they may move to blacklisting. Oliver Schutzmann is CEO of Iridium Advisors
Related session at the IR Magazine Forum & Awards - Greater China
Global trends, trade wars and Trump: Asia, China and ASEAN macro outlook
A look at the possible outcomes of factors that are shaping the face of global and regional capital markets over the next 12 months.
Find out more about the forum & awards here.
Asset managers must adopt new strategies to gain growth, says report
Boston Consulting Group says managers should shore up defenses and adopt more aggressive strategies
Asset managers must focus on new strategies to put their growth on a more consistent footing following a difficult year, especially in an industry dominated by a small number of players, according to a new report from US-based Boston Consulting Group (BCG).
The report notes that the asset management industry, after several years of stellar performance, struggled with a more challenging environment in 2018, caused by bouts of financial market volatility, tightening monetary policy and slowing global growth. Assets under management, net inflows and revenues all came under considerable stress last year.
In a study of global managers representing $39 tn in assets under management – roughly half the industry – BCG finds that assets under management fell by 4 percent in 2018, in stark contrast to the 12 percent rise seen in 2017. New inflows, meanwhile, were up 0.9 percent – a decent return in the circumstances, but considerably weaker than the record 3.1 percent seen in 2017. The historical average stands at about 1.5 percent.
The shifting patterns of assets under management were reflected in revenues, with aggregate revenues rising by 3 percent, measurably less than the 9 percent gain seen in 2017. At the same time, costs continued to rise as the industry struggled to adjust to the macroeconomic environment and firms invested in areas such as data and analytics.
Regulatory measures, particularly Mifid II, were also major drivers of increasing costs. The average cost-to-income ratio in this study was 66 percent in 2018, marginally up from 65 percent in 2017.
‘In a worst-case scenario, by 2023 profits will have decreased by nearly one third,’ warns Renaud Fages, a BCG partner based in New York, co-author of the report and global leader of the firm’s asset management segment, in a statement. ‘The outlook is not entirely gloomy, however. Challenging periods present opportunities for change and, in a largely winner-takes-all world, the chance to get ahead of the competition.’
The battle between active and passive strategies continued to play out in 2018, with passive grabbing most of the inflows in the US, while active held its own in Europe and Asia-Pacific. Ten of the 15 most popular strategies in the US were passive, with global, emerging market and specialty themes continuing to prosper, making up one third of the top 15. Europe, where just five of the top 15 strategies were passive, continued to lag the US.
‘Passive is increasingly popular with both retail and institutional investors, and a price war is proceeding apace,’ says Dean Frankle, a BCG principal based in London, co-author of the report and the firm’s asset management topic leader in the UK. ‘Some active managers have responded by restructuring fee schedules, shutting underperforming funds and launching new products.’
In the US, $620 bn of inflows were offset by $491 bn of outflows. The trend in recent years has been for winning firms to capture the lion’s share of inflows, and that continued in 2018, albeit at a slightly slower rate – and mainly in the US.
The top 10 US players captured 81 percent of mutual fund flows of firms with positive flows, compared with 85 percent in 2017. In Europe, the top 10 accounted for 29 percent of inflows in 2018, down from 35 percent.
According to BCG, there are two key strategic approaches for asset managers working to prepare for the future: shoring up defenses and adopting more aggressive strategies. Defensive moves include focusing intently on costs, reviewing the portfolio and optimizing pricing. Aggressive strategies may comprise refocusing on client retention, leveraging data and analytics and seeking M&A opportunities.
‘As leaders contemplate a tougher future, they should concentrate on costs with a simultaneous focus on ensuring clients are highly motivated to remain on board,’ notes Qin Xu, a BCG partner based in Hong Kong, co-author of the report and the firm’s asset management topic leader in Asia.
‘But asset managers may also consider more aggressive approaches, such as leveraging advanced analytics or moving into new locations. A downturn brings inevitable risk but, viewed constructively, it may present an inviting window of opportunity.’
Spotlight on Asia: What every IRO should be thinking about heading into 2019
This article was produced by ELITE Connect and originally published on the ELITE Connect platform
In the final installment of our series on future gazing into 2019, we turn our attention to Asia and hear the thoughts and plans of Hannah Yulo, chief investment officer at DoubleDragon Properties Corp, and Heather Xie, IR manager at China Modern Dairy Holdings.
What’s been your main IR focus in 2018?
Hannah Yulo: We’ve allocated our IR time to a more targeted audience of investors in 2018, specifically those focused on high-growth stories like ours. We’ve spent a meaningful amount of time on site visits and one-to-one update calls with individual fund managers that are committed to investing for the medium to long-term.
Heather Xie: We’ve had two main focuses this year: we’ve been working on developing and improving communications with our existing investors and analysts to make the process run more smoothly, and we’ve been identifying new potential investors and establishing connections to share more about our business.
What are the main topics on your mind when you’re thinking about this year?
HX: We’ll be building even further on our investor communications and continuing to enhance our presence in the marketplace with more efficient interaction. We’re also planning to try out new forms of communication, including reverse roadshows.
HY: The rising interest rate environment is a big consideration but we’re fortunate that we have fully secured our funding requirements ahead of our 2020 plan, with long-term funding secured at fixed interest rates for the duration of our seven to 10-year tenures. The company’s yield on cost for future projects will be substantially superior to those of property companies that are only securing their funding today, as benchmarks have moved up considerably.
How do you think the IR landscape in Asia will change and develop in 2019?
HY: I believe there will be a major reallocation of portfolio investments in Asia, particularly continuous foreign outflows from markets like China, due to the effects of the trade war, rising US Treasury yields and other issues. This will lead to more inflows in emerging markets like Bangladesh and Myanmar, which are expanding by more than 7 percent per year. India, Vietnam and the Philippines are also strong contenders to benefit from these flows as their markets are considerably more mature.
HX: I think general appreciation of IR roles continues to grow in Asia. As such, corporates will increasingly pay more attention to the IR role and the IR function as a whole, and we can expect to see better investor communications as a result.
What do you feel the main issues for IROs in general will be this year?
HX: In Asia, we’ve seen some volatility and this can be challenging to deal with. IROs need to focus on the positives, maintaining efficient communications and delivering confident messages to investors when markets go low and do not reflect the intrinsic value of the company.
HY: I believe the main issues for IROs will be identifying and responding to country-specific risks as new fund flows will focus attention on economic policies and political outlook. I foresee a great deal of attention shifting to country-specific risks involving Vietnam and the Philippines because the two countries are quite similar in many aspects, especially with regards to their growing workforces.
Can you share some of your 2019 plans with us?
HY: As a newly listed property company that aims to complete a diversified portfolio of 1.2 mn square meters of leasable space by 2020, our business is developing fast. As our properties start to turn over and commence their operations, we will be able to have more meaningful discussions with our investors and we will inevitably start to attract a whole new slew of investors as we grow further. This year will be an exciting and opportune time to engage with them.
HX: We’ve already planned some of our regular activity, such as more vivid forms of results announcements, but we’re also planning more engagement with potential mainland China investors. We’re currently working on our plans for the best ways to do this.
Investors add risk going into equities, says BofAML
Global equities allocation rises 31 percentage points Investors have added risk, rotating into cyclical plays (equities, Europe, industrials, banks) and out of defensive ones (bonds, real estate investment trusts, utilities and staples), according to the latest Bank of America Merrill Lynch (BofAML) fund manager survey for July.
Allocation to global equities retraces almost all of last month’s dip, rising 31 percentage points to 10 percent overweight, reveals the survey.
Looking at regional equity allocations, the US and the eurozone tie as the second-most favored regions, both at 9 percent overweight, with emerging markets continuing to top the list, with 23 percent of investors surveyed indicating they are overweight in the asset class.
Global growth expectations have risen from last month’s 10-year low, rebounding 20 percentage points to 30 percent of investors surveyed expecting global growth to weaken over the next year. But only 1 percent of fund managers surveyed expect a higher global consumer price index in the next year – the most bearish inflation outlook for seven years.
Almost three quarters (73 percent) of investors think the business cycle is a risk to financial market stability, marking an eight-year high.
A record 48 percent of investors are concerned about corporate leverage, and global profit expectations remain flat, with 41 percent of those surveyed saying they expect profits to deteriorate in the next year. Corporate payout ratios – including share buybacks – are too high, according to a record net 38 percent of fund managers.
The average cash balance has fallen to 5.2 percent from 5.6 percent – still above the 10-year average of 4.6 percent – and investors’ allocation to cash has ticked down two percentage points to 41 percent overweight, also well above the long-term average.
Concerns about a trade war – 36 percent – have waned but still top the list of tail risks cited by investors; monetary policy impotence climbs to the second spot at 22 percent and a China slowdown (12 percent) and bond market bubble (9 percent) round out the top four.
Long US treasuries – 37 percent – remains at the top of the list of the most crowded trades identified by fund managers, ahead of long US tech (26 percent) and long investment grade corporate bonds at 12 percent.
‘The dovish Fed and trade truce have caused investors to reduce cash and add risk,’ says Michael Hartnett, BofAML chief investment strategist, in a statement. ‘But their expectations of an earnings recession and debt deflation still dominate sentiment. The pain trade for the summer remains up in stocks and yields.’
GRI opens in Singapore to boost ESG in regional capital markets
International body expands work in ASEAN region
The Global Reporting Initiative (GRI) – the international body that helps companies organize and communicate their ESG data to wider stakeholders – has opened a regional hub in Singapore as part of its Association of Southeast Asian Nations (ASEAN) work.
This reflects a greater move to ESG reporting in the region, as Singapore Exchange (SGX) already requires listed companies to provide sustainability reporting. GRI says that more than 90 percent of the world’s largest companies report ESG information, of which 75 percent use the GRI Standards.
The GRI ASEAN hub was launched on Tuesday with the backing of 12 companies: real estate groups CapitaLand and City Developments, DBS Bank, financial services companies EY, KPMG and PwC, infrastructure company Keppel Corporation, utilities company Sembcorp Industries, SGX, telecommunications company StarHub, thought leadership body Stewardship Asia and Tata Consultancy Services.
The companies have all contributed to the funding to run the hub for three years and will all participate in the GRI ASEAN advisory committee, which will inform the hub’s regional action and priorities.
Tim Mohin, chief executive of GRI, says in a statement: ‘GRI’s experience around the world shows disclosure helps businesses improve performance, build relationships with global buyers and increase their reputation as responsible global citizens.’
He adds that this is an ‘historic opportunity’ to ‘embed’ the values of corporate responsibility and ‘nudge’ the allocation of capital to sustainable ways of working. ‘The only way to do this is with high-quality ESG disclosure based on a global common language: the GRI Standards,’ he says.
GRI already has similar offices in New York for North America, New Delhi for South Asia, Johannesburg for Africa, Hong Kong for the Greater China Region, Bogota for Hispanic America and São Paulo for Brazil. GRI’s secretariat is based in the Netherlands, which helps to cover Europe.
GRI’s ASEAN hub is headed by Michele Lemmens, who is head of business sustainability for Asia-Pacific at Tata Consultancy Services.
The move will boost regional markets in terms of a beneficial focus on ESG and has been welcomed by Singapore Exchange Regulation (SGX RegCo), the regulatory arm of the SGX.
‘We welcome the establishment of GRI’s regional hub in Singapore where it can generate valuable know-how for ESG reporting and sustainable finance, and in turn contribute to the development of Singapore as a global financial center,’ says SGX RegCo CEO Tan Boon Gin.
As more mainstream investors integrate ESG into decision making, it is crucial for IROs to understand what investors want to hear… and what they don’t!
Understand your audience: What the key drivers and material ESG issues investors find truly add value Find out more about the forum & awards here.
Best investor event: How PetroChina Co and Yue Yuen Industrial won in Greater China
Companies were joint winners of the best investor event (large cap) award at the IR Magazine Awards – Greater China 2018
This profile is taken from the report Award-Winning IR – Asia 2018. Download your sample copy here.
Two companies share the award for best investor event in the large-cap category this year: PetroChina, the listed arm of state-owned China National Petroleum Corporation, and Yue Yuen Industrial, the Hong Kong- headquartered, Taiwanese footwear manufacturer, which is owned by Pou Chen Group, the largest branded athletic and casual footwear manufacturer in the world.
For PetroChina, it was the firm’s corporate day and reverse roadshow that secured the win. With oil prices rising steadily ‘and domestic demand for natural gas also increasing significantly, PetroChina has once again become the focus of the market,’ it says in its awards entry. This, coupled with the fact that ‘foreign investors are paying more attention to disclosure on ESG criteria’, told PetroChina it was time for a corporate day and reverse roadshow – though the Beijing-headquartered oil and gas giant stresses that it regularly holds a wide range of investor events. In fact, it says recent years have seen it hold more than 30 reverse roadshows with more than 400 participants – all well received by the market. As was this event.
‘The 2018 corporate day and reverse roadshow event was a huge success,’ says PetroChina, with ‘a lot’ of positive feedback. And the numbers speak for themselves: ‘A total of 112 investors, analysts and shareholders from 81 investment institutions joined the event, with Nomura, Morgan Stanley and Bank of America Merrill Lynch raising the target price of the company, and Morgan Stanley recommending PetroChina as a top pick after the event,’ it notes.
For Yue Yuen Industrial, it was the company’s first ever site visit to a new automated facility, held in May 2018, that won it an IR Magazine Award. Despite making the decision for ‘ethical reasons’ not to sponsor or subsidize travel – which for analysts coming from Hong Kong, for example, included seven hours of plane and road travel to the firm’s new automated footwear manufacturing facilities in Vietnam – the two-day event attracted 14 buy-side and sell-side analysts, all of whom had been invited directly by Yue Yuen’s in-house IR team. The two days were split between the sell side, the buy side and existing shareholders ‘in order to meet the differing needs of these investors.’
The impact of taking analysts to visit the automated site – in an industry that Yue Yuen says ‘remains labor-intensive’ – and offering face time with Yue Yuen’s CFO and the management of different manufacturing business units was very positive, says the company. It received strong buy-in from sell-side analysts, with a number of ‘positive and accurate research reports [published] shortly after the visit’ exposing Yue Yuen ‘to a huge base of institutional investors in an efficient and cost-effective manner.’
The company even says the site visit may have been a factor in the stabilization of its share price in the second quarter of 2018, ‘which had suffered as a result of long-term concerns about margins and ordering trends.’
Finally, Yue Yuen says the lasting effect of the event – rare among the ‘secretive’ original equipment manufacturers – is a boost to credibility, as it demonstrated the firm’s sincerity about improving transparency and meeting the information needs of investors. ‘This set Yue Yuen apart from its competitors in the eyes of the investment community,’ says the company.
US and European ETF investors looking to China
Sixty-nine percent of US and 71 percent of European respondents plan to invest in Chinese capital markets
The vast majority of US and European ETF investors plan to invest in China in 2019, according to a survey from New York-based private bank Brown Brothers Harriman (BBH).
According to the survey – Shining Through: ETF Opportunities in Greater China – 69 percent of US and 71 percent of European respondents have plans to invest in China’s capital markets this year with a relatively even split between leveraging ETFs and making direct investments through existing inbound investment channels.
For US and European investors, historical performance is cited as the most important selection criterion, highlighting an interest in products that can mitigate risk or generate outsized returns.
This is aligned with China’s ongoing index inclusion process, which began in 2018 when MSCI started to include Chinese A-shares in its flagship Emerging Markets benchmarks.
In February MSCI announced the next stage in A-shares index inclusion. The existing inclusion factor of 5 percent for the Emerging Markets Index will be increased to 20 percent in a three-step process that will be completed by November 2019. The A-shares weight in the pro forma Emerging Markets Index will increase to 3.3 percent after the completion of the three steps. Expectations are therefore close to $70 bn for inflows into Chinese A-shares in 2019 – with index inclusion being a driving factor, notes BBH.
Greater China represents just 2.1 percent of the $5.1 tn global ETF market; the US represents more than 70 percent, with nearly $3.6 tn, while the European market reached $793 bn in 2018.
In addition, the survey highlights that mainland China investors show strong interest in accessing Hong Kong ETFs, with 98 percent of mainland respondents interested in buying them either through the Stock Connect or Mutual Recognition of Funds program.
Moreover, cost is not a key driver in ETF selection across Greater China – somewhat defying global industry assumptions that cost is everything, with expense ratio near the bottom of the list of ETF selection criteria in mainland China and Taiwan.
‘These findings highlight the unique investor preferences and differing stages of ETF use across Greater China. ETFs are becoming an increasingly important component of institutional investors’ portfolios across the region,’ says Chris Pigott, senior vice president of BBH Hong Kong. ‘Looking forward, regulatory development and enhanced ETF market infrastructure are areas of focus that will provide the foundation to support the expected growth.’
The Greater China findings are a subset of a larger global ETF investor survey that measured the expectations and preferences of 300 institutional investors, financial advisers and fund managers from the US, Europe and Greater China.
Listen to a selection of interesting podcasts from around the globe:
How to make your reporting relevant: Ticker 105
Companies don’t make money the way they once did. Intangible assets like patents, brands and R&D drive value. Yet you wouldn’t know it reading a standard financial report – which hardly anyone does anymore anyway. The average publicly traded firm has its annual report downloaded from Edgar 28.9 times in the five days followings its filing.
Earnings, shmernings. On this Ticker podcast, iconoclast accountant Baruch Lev reconstructs the balance sheet – and offers tips on how to systematically share with investors the sort of information they really want (hint: think ‘strategic assets’).
How to not be an activist’s target this proxy season: Ticker 102
‘The most important factor is a company that is underperforming and doesn’t articulate why’
Shareholder activism has exploded since the start of the financial crisis a decade ago. New players, technologies, strategies and issues present IROs with a complex playing field and the likelihood of a dynamic 2019 proxy season. While any underperformer is vulnerable, a recent report suggests consumer discretionary, financials and telecommunications companies will find themselves especially in the crosshairs.
On this Ticker podcast, host Jeff Cossette speaks with top proxy solicitor Bruce Goldfarb, founder and CEO of Okapi Partners. Goldfarb says companies with strong shareholder communications and robust ESG policies are better positioned to deter or fend off an activist’s attack.
‘[Digital tools] are fundamentally changing the way we work and communicate with each other’
If one single quality could define the millennial generation as a market segment, it’s that its members are digital natives. Rob Krugman isn’t a millennial – but he knows people who are. And as Broadridge’s chief digital officer, he’s picked up a few ideas for IR teams looking to adapt their storytelling to the digital age.
Women in IR: The importance of an inspiring leadership team
Fortis has been a major supporter of IR Magazine’s women in IR campaign and when we caught up with Stephanie Amaimo, the company’s vice president of investor relations, she talked about what the campaign has meant to her and how Fortis’ board and management team walks the walk on diversity.
How Agnico Eagle Mines feels the Mifid II effect
Agnico Eagle Mines typically travels to Europe four times per year and, in recent visits, Brian Christie, the company’s vice president of investor relations, says investors have been encouraging more direct engagement.
Speaking to IR Magazine on the red carpet at the Canada Awards last month, Christie said: ‘A lot more European investors are reaching out to us directly and saying, Don’t bring a broker. Just give us a call and set up a meeting.’
How IR data is becoming more actionable
IR teams are ‘at an inflection point in terms of behavioral tendencies,’ according to Dan Romito, global head of investor analytics at Nasdaq.
Speaking to IR Magazine at the NIRI national conference in Phoenix earlier this month, Romito referenced Nasdaq’s analysis of 400,000 investor interactions, which finds that two thirds of interactions between issuers and investors last year happened outside of traditional sell-side conferences.
The IR Magazine Forum & Awards - Greater China
For over 30 years, IR Magazine has honored excellence in investor relations around the world. We are pleased to be back in Hong Kong for 2019 to continue recognising and helping further IR best practice. Last year’s Greater China event attracted over 150 senior IR professionals – this internationally renowned event looks at the very best the IR community has to offer through our forum and awards. OUR FORUM: The event kicks off with a forum where investors, analysts and heads of IR from small, mid and large cap companies come together to discuss key issues relating to investor relations, corporate governance, shareholder needs and the role of senior management in IR.
OUR AWARDS: The forum sessions are followed by our prestigious awards ceremony. We present two types of awards categories – researched and nominated – both celebrating the success of those individuals and companies that are leading the way in IR across Greater China.
Book your tickets and find out more about the event here.
Contact us
For agenda-related inquiries Gargi Iyer gargi.iyer@irmagazine.com +44 20 8004 5619 For awards-related inquiries Lauren Wilson lauren.wilson@irmagazine.com +44 20 8004 5339
For all other inquiries Priscilla Lim priscilla.lim@irmagazine.com +44 20 8004 6214
