China and Germany enter top five for sources of new investment for next five years

Feb 11, 2016
<p>US and UK remain in first and second place, respectively, shows BNY Mellon research</p>

Companies across the globe remain ‘firmly focused’ on the US and the UK as the top destinations for investment, according to BNY Mellon’s most recent survey of global trends in IR.

Firms name the US, the UK, China, Germany and Singapore as the five countries likely ‘to have most strategic importance for new sources of investment in the next five years’.

Half of respondent companies say China is likely to have strategic importance as a new source of investment in the next five years, putting the Asian nation in third place behind the US and the UK, according to BNY Mellon. Germany also enters the top five for the first time, climbing from seventh place in 2013 to fourth in 2015.

‘This interest has come predominantly from companies in Asia-Pacific and Latin America,’ explain the report authors. ‘Also of note, companies globally found China a promising source of capital, ranked third in 2015, up from fifth in 2013 [and] chosen primarily by companies in Latin America and the Middle East.’

Although Singapore remains in the top five, it has dropped two places compared with 2013’s findings.

Talking about the ‘increased prominence of China’ the study authors say: ‘This contrasts with the decrease in the importance of several of China’s regional neighbors – Singapore, Japan and Hong Kong – all of which fell in rank from 2013 to 2015’.

A moving target

The report – using the responses of 550 participants from companies in 54 countries, with research conducted between February and April 2015 – also looks at how targeting practices have changed between 2013 and 2015.

The biggest shift sees regional/country focus drop from pole position in 2013 to eighth place in 2015. Moving up the ranks from fifth place in 2013, however, is a focus on investment style (value, GARP, and so on), which became the most important criteria for targeting potential new investors in 2015.

Rounding out the top three is peer ownership, which remains in second place, and investor type (mutual fund, pension fund, and so on). Sector focus climbs from eighth place in 2013 to fourth in the most recent study, while size of investor drops one place to fifth.

‘Companies’ choices of how they target potential new investors may signal their recognition that investors’ focus has returned to fundamentals. In 2010, investment style topped the list of criteria companies considered when targeting new investors, but its importance fell from 2011 to 2013,’ explains BNY Mellon. Investment style was replaced by a regional/country focus but ‘this trend appears to have now reversed’.

The researchers also comment on the number of companies that do not actively target investors, which fell from 10.2 percent to 8.8 percent in 2015. Despite the small drop, ‘it is still surprising to see that in 2015 nearly one in 10 companies still report that they do not target investors,’ notes BNY Mellon.

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