A survey conducted by BNY Mellon finds that Asian institutional investors are more likely to invest in global companies that have a secondary listing Asia for diversification, favoring a home market bias.
The survey featured 40 interviews with investors specifically mainland Qualified Domestic Institutional Investors (QDIIs), Hong Kong and Singaporeheadquartered investment firms and Hong Kong and Singaporebased subsidiaries of global asset management firms in Hong Kong, Singapore and China – representing more than $60 billion in equity assets under management.
The Asias Evolving Investment Landscape study, BNY Mellons first-ever formal study of this category of investors, uncovered a strong desire among institutional investors in these markets to diversify more globally their equity holdings. Nearly half (47%) plan to increase investments in companies domiciled outside their home market over the next one to five years. They cited client requests, portfolio diversification, and opportunities for growth as factors motivating them to look abroad. We are moving in a direction to increase the rate of investment outside of Asia, said a survey respondent from a Hong Kong-headquartered investment firm. We are striving to increase our global mandate.
Several factors impact on a global issuers decision to raise equity capital in Asia, the study found. The investors surveyed were particularly open to investing in companies that derive revenue from Asia, with 54% saying that it was a key criterion. More than half of the investors surveyed (53%) said a secondary listing on an Asian exchange increases the chances they will invest in foreign-domiciled companies.
Weve known for years that home market bias to invest in domestic companies is more pronounced among Asian institutions, and that theres a strong desire to correct that, said Michael Cole-Fontayn, CEO of BNY Mellons Depositary Receipts business. Now, we can see how ripe the opportunity is for global issuers and how they can increase their chances of cultivating ties to investors in Asia.
I do not differentiate between the Hong Kong, Singapore and other Asian exchanges. The company simply has to be listed on one of the regional exchanges for us to invest in it, said a respondent from a Hong Kong-based subsidiary of global asset management firm.
Additional findings of the survey include:
– Overall, 62% of institutions surveyed said a local exchange listing increases their awareness of a company
– Hong Kong- and Singapore-based investment firms were the most definitive in stating that a local listing increasing their likelihood of investing in a foreign company, with 57% responding affirmatively and 62% saying that a listing in Asia increases their awareness of a company
– Over half of the investment community surveyed (61%) does not definitively differentiate between the regional exchanges in Asia where foreign companies have secondary listings
– More than half of investors (55%) are not required to meet with senior management of foreign companies before making an investment, and many report that as long as they can correspond with management throughout the year, a face-to-face meeting is not vital to their decision-making process when considering investment opportunities outside of Asia
– Over two-thirds (70%) of investors surveyed would like to meet management teams at least semi-annually for meetings and informational updates, and 97% would like to correspond with management at least once a year.
(JDC)