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New York, U.S.A. — Asian institutional investors planning to increase investments in non-Asian companies express a preference for the equities of companies that draw revenue from Asia or have a secondary equity listing on a local exchange, according to a survey conducted by BNY Mellon, the global leader in investment management and investment services. The survey, titled Asia’s Evolving Investment Landscape, is BNY Mellon’s first-ever formal study of this category of investors.
Recognizing Asia’s potential as a source of investment, BNY Mellon undertook a survey to gain further insight into current investment practices in the region and conducted 40 in-depth interviews with investors in Hong Kong, Singapore and China, representing more than US$60 billion in equity assets under management.
The report focused on these locations as they are the primary destinations for companies considering secondary equity listings. Investors provided views on their need for portfolio diversification, their appetite for global equities, and the potential opportunities in these markets for global equity issuers.
“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 Michael Cole-Fontayn, CEO of BNY Mellon’s Depositary Receipts business. “Now, we can see how ripe the opportunity is for global issuers and how they can increase their chances of cultivating ties to investors in Asia.”
The report focused on three types of investors: mainland Qualified Domestic Institutional Investors (QDIIs); Hong Kong– and Singapore–headquartered investment firms; and Hong Kong– and Singapore–based subsidiaries of global asset management firms.
The study uncovered a strong desire among institutional investors in these markets to diversify more globally their equity holdings. Nearly half (47%) plan to increase investments in companies domiciled outside their home market over the next one to five years. They cited client requests, portfolio diversification, and opportunities for growth as factors motivating them to look abroad. “We are moving in a direction to increase the rate of investment outside of Asia,” said a survey respondent from a Hong Kong-headquartered investment firm. “We are striving to increase our global mandate.”
BNY Mellon found that each additional percentage point in 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 as the portfolio allocations of Asian institutions fall in line with peers in North America and Europe that invest larger proportions in equities of non-domestic companies.
Several factors impact on a global issuers’ 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 it was a key criterion. In addition, a listing on a regional exchange universally increases both the awareness of non-Asia-domiciled companies and the likelihood that institutions in Asia will invest in them. More than half of the investors surveyed (53%) said a secondary listing on an Asian exchange increases the chances they will invest in foreign-domiciled companies.
“I do not differentiate between the Hong Kong, Singapore and other Asian exchanges. The company simply has to be listed on one of the regional exchanges for us to invest in it,” said a respondent from a Hong Kong-based subsidiary of global asset management firm.”
“There’s a substantial overlap of interests between investors in Asia looking to diversify their portfolios and global companies looking to raise capital,” said Guy Gresham, New York head of the global IR advisory team in BNY Mellon’s DR group. “A secondary listing and open investor communications policy go a long way in helping these companies gain access to long-term equity capital in this part of the world.”
Additional findings of the survey include: