‘We are navigating too many uncertainties around the world, which make our investment research and analysis fairly difficult,’ said William Tsang, head of research and portfolio manager at Chartwell Capital.
Tsang was one of the panelists at the ‘Expectations of IR teams during uncertainty in 2023’ session held as part of the IR Magazine Forum – Greater China 2022 this week.
‘I would say this is probably one of the very few years [when in] nearly all industries [there] are some external factors [that] pose some risk to us,’ he said. ‘Another thing on my mind is how we are going to identify or locate sectors or industries that pose a lower risk next year. [For example], lower risk from the interest-rate hype cycle, potential recessionary economies, logistic value-chain disruptions, politics – both internal and external – and the tensions between different political powers.’
The virtual session addressed concerns about the coming months and aimed to give IROs an understanding of what investors prioritize amid economic volatility. Panelists also answered questions on what international investors look for when investing overseas.
With a specific focus on China, one of the panelists noted that investors in the region are keeping an eye on the country’s inflationary moves.
‘The key focus [for investors] at the moment is on what is happening in China,’ said Simon Weston, fund manager at AXA Investment Managers. ‘We have [recently] seen some important announcements and statements on policies, both around the real estate sector and, more specifically, in terms of the Covid-19 policy, as we move away from the zero-Covid policy [in China].’
Weston noted that such changes are likely to have significant implications for the wider Asian region and also on a global scale. ‘In what is already a high-inflation world, China has [had] a deflationary impact simply because of the weakness in the economies,’ he explained. ‘So if we do get recovery in China, that obviously has implications for inflation and interest rates at a global level as well.’
A call for more in-person meetings
The debate surrounding in-person, virtual and hybrid meetings remained wide open. For many companies, virtual settings allow them to cut costs and reach a wider number of investors across the world, all without negatively impacting their communication strategies.
For others, a return to in-person meetings represents an opportunity to better engage with current and new shareholders. For a fair number of firms, hybrid is the answer. But what do investors want? For the three panelists in the session, at least, in-person meetings were the way to go.
‘I personally feel the effects of face-to-face events are fairly important right now,’ Tsang said. ‘If you are an IRO, I would strongly encourage you to actively reach out, meet with people and get more exposure, so we [as investors] know you’re around. And if there are any investment opportunities and potential, we will definitely remember who you are.’
Agreeing that physical meetings represent a better opportunity for investors, Tony Watson, portfolio manager at Far East Investment Management, said: ‘There are a lot of investors out there that want to hear your story. And I would say the face-to-face format is very important to read the body language, especially for issuers that manage physical assets. It’s very useful to get investors out to factories, toll roads and property developments.’
Watson stressed that what investors and analysts want from IR teams are details on how they are going to overcome challenges posed by a few difficult years and get themselves back on track. Investors do not want to hear a rehash of what happened over the past couple of years, but need IROs to ‘be proactive and over-communicate’.
Successful IR strategies
During the session, panelists were asked to highlight any IR strategies that impressed them in 2022.
Addressing the significant rise in interest rates at a global level and the profound implications it had on companies in terms of valuations and gearing capital structure, Watson praised firms that successfully managed to explain to the buy side the impact of higher rates on their business.
‘
We’ve been encouraged by those companies that have [done] quite a lot of work looking at this and understanding or trying to work out what it means for them in the long term,’ he said. ‘More generally, that’s something I would encourage IR and a lot of companies, particularly those with some exposure to higher interest rates, to really focus on.’
For Tsang, IROs needed to focus on building their network and understanding their investors’ needs and strategies. He said one of the most frequently asked questions, especially among companies moving within the Hong Kong stock market, is: how can firms attract liquidity?
‘I don’t have a perfect solution, but I would suggest that IROs are more proactive,’ he said. ‘Networking is quite key, especially in times of crisis. You can probably invest your time expanding your network, meeting with more bankers, service providers and even media, so that you get more exposure [to] investors in general.’
To find out more about the IR Magazine Forum – Greater China 2022, please click here.
