Asian fund managers planning to boost investments in non-Asian companies prefer stocks that draw revenue from the region or have a secondary listing on a local exchange, finds a new survey*.
Almost half (47%) the firms polled plan to increase investments in companies domiciled outside their home market over the next one to five years.
BNY Mellon found that each additional percentage point in the global allocations of Asia-based institutional portfolios potentially equates to $7.3 billion in equity assets. This figure underscores the substantial opportunity for global issuers, notes the asset management and servicing firm.
“We’ve known for years that home-market bias to invest in domestic companies is more pronounced among Asian institutions, and that there’s a strong desire to correct that,” said Gregory Roath, head of Asia-Pacific for BNY Mellon’s depositary receipts business (see graph).
Several factors affect a global issuer’s 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 was a key criterion.
Moreover, over half the investors surveyed (53%) said a secondary listing on an Asian exchange increases the chances they will invest in foreign-domiciled companies.
As for which Asian bourse they buy from, most of the investment community surveyed (61%) does not definitively differentiate between the regional exchanges in Asia where foreign companies have secondary listings (in China, Hong Kong and Singapore).
Meanwhile, 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 Asia.
That said, 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.
The study was based on 40 interviews with fund houses in China, Hong Kong and Singapore, representing $60 billion in equity assets under management. It focused on these locations as they are the primary destinations for companies considering secondary equity listings.
The survey targeted three types of investors: mainland China qualified domestic institutional investors (QDIIs); Hong Kong- and Singapore-based investment firms; and Hong Kong and Singapore subsidiaries of global asset managers.
* Asia’s Evolving Investment Landscape is BNY Mellon’s first-ever formal study of this category of investors.