Asian investors to shake up home market bias
Nearly half of all institutional investors in Asia plan to allocate a larger proportion of their funds to non-domestic companies over the next five years, according to a study by Bank of New York Mellon.
These financial institutions from China, Hong Kong and Singapore manage a substantial and fast-growing pool of capital, amounting in 2012 to just under $1 tn in equity assets, a figure that has grown by an average of 25 percent a year over the past five years.
Until now, a strong home market bias has prevailed when choosing where to invest: indeed, only 15 percent of Asia’s funds are invested in non-Asia-domiciled companies. This figure is relatively low compared with European and North American counterparts, which allocate 39 percent and 25 percent, respectively, to equities outside of their primary investment zone.
This is starting to change, however. Since the beginning of the financial crisis in 2008, Asian investors have increased the global aspect of their portfolio. This is a significant opportunity for western companies seeking to raise capital, as each additional percentage point in global allocations from these investors potentially equates to $7.3 bn, reveals the study.
When considering diversification, more than half of Asian investors favor western companies that derive direct revenue from Asian operations. A secondary listing on an Asian market – Hong Kong, Singapore or any regional exchange in Asia – is also described as a key selling point, especially for investors that have equity portfolios dedicated exclusively to Asia.
The study also finds that nearly one in three global major western corporations indicate an interest in an additional listing in Greater China, up from 28 percent in 2010.
It further notes that companies’ IR departments should routinely include Asia in their targets, pointing out that managing a relationship with Asian investors is likely to be less complicated than it sounds. More than half the investors surveyed say they are not required to meet senior management before investing, and that meeting with a well-informed IRO in lieu of a C-suite executive is adequate.