Asian firms have typically fared better during the credit crunch, though high-risk category investments have suffered, while Asian IROs are making increased use of local professional societies, networking events and seminars.
Over the past year, worsening worldwide market conditions due to the credit crunch have made professional life more challenging for IR professionals, and although Asian economies have handled the crisis better than many others, it hasn’t been easy.
Investors across a wide range of sectors have become more jittery as the crisis has unfolded. Reduced access to credit, faltering confidence and rising energy and food prices have all helped to fuel uncertainty in the market.
It is challenging times like these that really affect investor behavior, according to Evan Gallagher, a Singapore-based director of IR at Australia’s Allco Finance Group.
‘It has been a year of ensuring that investors, whether current or potential, are fully informed of what the business is up to,’ Gallagher comments. ‘My view is that transparency and a proactive nature are extremely important at all times, but the level of importance is heightened during times such as those we are facing now. Investors find greater comfort when they are kept well informed of listed entities’ activities.’
Face-to-face contact
Gallagher notes that the market turmoil had placed many institutional and retail investors in a tough situation, given the cash outflows, reduced liquidity in the market and the tightening credit conditions. ‘It has been very important for companies to get in front of investors and allay any unwarranted concerns,’ he points out. ‘As one investor said to me earlier this year, Companies want to see us and beat their chests when things are good, but they go quiet when things are tough. That is when I need to see them the most.’
This view is shared by Audrey Ho, head of IR at Malaysian telecommunications company DiGi. She says market uncertainties have had an impact on many companies operating in Malaysia, with IR professionals in these companies having to ‘work harder to manage expectations and provide as much transparency as they can.’
Fund managers are increasing their cash balances, pulling back on marginal equity plays and fleeing to investment safety, with liquidity, sustainability and cash flow taking center stage, adds Andrew Heinrichs, IR manager at Singapore-listed Surface Mount Technology.
Despite companies’ best efforts, there has been a profound change of investor behavior in the Asian marketplace, the three agree. Investors have sold down their high-risk investments and parked their money in safer asset categories, Ho says. ‘High-yield and defensive stocks are currently the flavor of the day and companies in the so-called high-risk categories have to work hard to defend their investment thesis to investors,’ she adds.
Gallagher concurs, arguing that investors would rather sit on higher levels of cash or even pull out of the market to wait to see where things will go. ‘I spoke to a major global institutional investor yesterday and when I asked what his view was, he simply shrugged his shoulders,’ he says. ‘This is a person who has always been very definitive in all of our conversations on the market. He is sitting on his biggest cash position ever, waiting for the market to settle.’
Irrational trading
Some institutional investors are also seeing net cash outflows from their own funds for the first time in years, Gallagher notes. ‘We are seeing what is viewed by many as irrational trading, which is affecting the market as a whole,’ he explains. ‘It also doesn’t help when email news, internet reports and the newspapers talk doom and gloom on a regular basis, so we most certainly have experienced changing investor behavior over the past year.’
It is important for communication to remain open between investors and listed companies, Gallagher adds. ‘Listed companies should ensure they keep a good dialogue open at all times with the market, as awareness and trust are extremely important,’ he states. ‘There is good news out there but it’s easy for it to get lost in all the general market noise.’
While markets may be feeling the negative effects of the subprime meltdown, IRPAS, the Investor Relations Professionals Association (Singapore), has bucked the trend and seen a surprisingly strong level of activity, according to Gallagher, who sits on IRPAS’ board of directors.
‘IRPAS is now in its second year and I must admit I was pleasantly surprised with the level of activities and the continued events that have taken place,’ he says. ‘The organization is run on a voluntary basis by IR professionals who have plenty on their plates, but people have gone out of their way to organize and host regular events in Singapore.’
The association has organized educational seminars, talks from market leaders and service providers, and a range of networking events, Gallagher points out.
‘I have gathered a great deal of knowledge and many tips from the various networking events,’ he adds. ‘Learning from other IR professionals by listening to how they deal with certain situations, even debating the pros and cons of different IR styles, has all been very advantageous for my own professional development.’
