Check out one of Asia's key roadshow centers before the Chinese fireworks begin
Other cities may vy for its title, but Hong Kong is still the dominant financial center in southeast Asia and looks set to remain so after it becomes part of China in July.
With some $71.2 bn in institutional equity under management, according to Technimetrics, Hong Kong is the second largest financial center in the Pacific Rim region after Tokyo. The hustle and bustle of its financial arena makes it a must for those on the Asian swing of international or regional capital raising road shows. And, no company should underestimate the sophistication of one of the most open and freewheeling capital markets in the world.
Scheduling meetings in Hong Kong should be easy: the fund management business is concentrated in the Central Hong Kong district. You need only hop a short distance along Hong Kong's famous catwalks to visit fund managers in buildings like the Connaught Center, the Exchange Square complex and the Landmark. This allows for an intensive one-on-one schedule that can squeeze eight to ten appointments into a day. And when evening comes, you can explore the restaurants and nightlife of one of the most entertaining cities in the region.
Challenge Ahead
Scheduling meetings may be easy, but, companies interested in presenting their story to the city's fund managers shouldn't underestimate the challenge. Entering the fund management waters is no easy chore for those eager to tap the capital pools of Hong Kong.
One reason for this is the tremendous investment focus on Hong Kong and China securities. With the index of Red Chip stocks (Hong Kong-listed, PRC-controlled companies) growing by 110 percent last year, and the CLSA China World Index rising by 40 percent, it is hard to drag fund managers away from their trading screens. To shift attention from the local arena, the IR story must be attractive and well-designed to say the least.
'The bulk of fund managers in Hong Kong are emerging market players,' says Felix Miao, a director at Dewe Rogerson in Hong Kong. 'Therefore, it is very unusual and difficult for overseas firms to enjoy great success pitching to these investors. It is definitely worthwhile coming here if you are a large multinational from a well-developed country looking at Hong Kong as part of the greater China market. However, foreign companies must remain realistic about building a hefty institutional investor following in Hong Kong.'
Indeed, only a few fund managers follow US equities to any great degree. Of the $71.2 bn equity total, only $11.2 bn is in US equities. Jardine Fleming Investment Management and Schroder Investment Management lead the pack in US equity assets under management. And while Hong Kong institutional investors hold $9.5 bn in European equities, Asia Pacific equities dominate portfolios with over $50 bn invested in the region.
Dive in the Pool
So it's easy to see why foreign companies have a hard time attracting Hong Kong's institutional funds. But, there are growing pools of Hong Kong capital in search of portfolio diversification, and reaching them is well worth the effort over the long term. The large and growing mutual fund sector is the most promising target of companies, IR efforts.
While the pension fund business is only just coming alive (new legislation should make this sector well worth tapping into in the years ahead), mutual funds are a way of life in Hong Kong. The largest managers are Jardine Fleming, Fidelity, Templeton and Gam. They all hold funds that allocate a portion of capital to US or European markets.
Once the mutual fund industry is dealt with, and a couple of strategic calls have been made to government pension funds, attention may then turn to attracting the massive capital pools of Hong Kong's families. The wealth of the Li Ka Shings, Kwoks and Foks of Hong Kong is legendary.
These families are heavily invested in the region and have seen the millions grow into billions due to the success of property investments, China plays and manufacturing successes. They are not great believers in foreign stocks unless they see a synergy with the local market. But, if they do, they may take a major stake as a strategic investment. However, pinpointing where this family money is managed and meeting the moguls behind the curtain is a time consuming task.
'From a US investment perspective, there is not much institutional money invested directly in equities from Hong Kong,' says David Atkinson of Jardine Fleming. 'There is private money out here, but most Asian investors are looking for high-risk, high-return, and highly speculative Asian investments for their portfolio. Private investors, for example, are not long-term holders as I am. Most foreign managements who come here on corporate visits prefer to spend their time with investment managers who are prepared to hold their stock for the long term and not trade it off in search of a quick profit.'
Chinese Attractions
Another rising but equally elusive capital pool in the area of global investment are PRC companies and state-owned enterprises. China has over $100 bn of reserves and when Hong Kong comes on board that will rise to about $160 bn. This should make China the largest holder of US dollar reserves in the world and there is already lots of talk about the impact this money will have on the region and the world.
Already, fund managers are making the pilgrimage to Beijing and other parts of China to sell armloads of US Treasuries. The Chinese are expected to take off where the Japanese left off in the US Treasury market, and their impact is most evident in the primary market. It will not be long before corporate and state enterprise liquidity starts finding its way into other instruments.
Though it may be some time before equities are a mainstay of the portfolio, diversification is a topic under discussion behind the high walls of Zhongnanhai. Many major Chinese companies have window operations in Hong Kong. Yet, identifying which windows are willing to open up their treasure chest to your issue and where the buying power rests is another matter entirely.
While more Chinese companies are relying on fund managers to handle their portfolios, large amounts of liquidity are handled by the local treasury departments. So it may not be long before the segment becomes a target of IR campaigns.
Meeting Rules
Most investor meetings are held in major hotels. The five star hotels have splendid facilities for hosting investors and are eager to make them available. The best located hotels for the time conscious Central Hong Kong fund management crowd are the Mandarin, Ritz Carlton and Furama.
These hotels are all around the Star Ferry Terminal, a quick hop from the financial community. A little off the beaten track, but close enough to be part of Central and exclusive enough to attract fund managers are the Conrad and Shangri-La hotels.
Other major facilities available via a quick taxi ride away from Central are in the Wanchai District. For over-worked fund managers a quick walk to a Central location may be better than fighting for a taxi, but this district does host the most extensive and modern conference facilities. Located between the harbor front Grand Hyatt and New World hotel complex, it is also here that the newest conference facility is being constructed and that the hand-over of Hong Kong to China will formally take place.
All the above hotels have facilities to accommodate modest and medium-sized investor presentations. Hotel suites overlooking the harbor or the peak are particularly well-suited for one-on-ones. Lunches, of course, can easily be arranged, but you need drawing power to bring the hungry fund managers out of their warrens. Asian companies have the advantage because of the high level of interest in a good Asian story, especially ones coming out of China. Foreign companies, should forget about the flashy presentations to a roomful of interested buyers, and concentrate on more intimate one-on-one meetings instead.
'I don't go to roadshows. I would rather see companies stepping into my office where I control the agenda,' says Elisabeth Scott at Schroder Investment Management. 'Since there are very few fund managers investing in markets outside of Asia, those of us who want to speak with foreign companies prefer one-on-one meetings. Roadshows tend to be for private client fund managers and focus on a broader market. The questions and information provided during these kinds of presentations are often of little interest to me, especially if it's a company I know well.'
Tech Concerns
If you need high-tech operations for your meetings, be sure to call ahead and make sure the facilities have what is needed. While Hong Kong is technologically proficient, requests may be difficult to coordinate. For instance, videoconferencing services, in this area, are only just emerging.
Miao of Dewe Rogerson believes that in the next two years, all companies will be using multimedia presentations projected directly off computers. 'Over 90 percent of our clients have already adopted this approach. Slides will become a thing of the past,' he concludes. Timing your investor meetings and presentations is important as the windows of opportunity are narrow. At some of the more western fund management concerns, people hop to it early in the morning to deal with requests from the American time zones. The same holds true later in the day when London opens and the phone lines heat up to Europe.
With the Hong Kong market going full blast all day, this makes for an action-packed schedule for harried fund managers. Bigger companies can push for attendance at lunch or later in the evening when the fund management crew may be ready for a cocktail. Others will have to watch the issuance calendar closely for conflicts.
In terms of holidays, Hong Kong has many that you should watch out for. Most of the western holidays are kept, and their are a slew of Chinese holidays that should be noted. Chinese New Year is by far the biggest and falls near the beginning of February. The time varies from year to year. It seems that the PRC rulers are adding holidays to the schedule and subtracted a few others, so go back and check your calendars after July 1, 1997.
Another time to avoid Hong Kong is during the summer period. The intense heat and humidity of the June to September timeframe is never pleasant, and those who can escape the city then do. For those planning a roadshow to Hong Kong during the heat wave, make sure to bring an extra shirt or two and be ready to face a lower turn-out than during the heavy fall issuance period or the spring-time roll-out. And, for those looking for an event to drag out the faithful, the dragon boat races or the Rugby Sevens are interesting events around which to schedule a special occasion.
In the end, Hong Kong fund managers, like those in London and New York, expect professional presentations, hard numbers and not too much corporate PR. Keep in mind that with the 1997 hand-over approaching there will continue to be an intense focus on China. Dragging investors away from one of the world's most exciting markets will take some doing. However, a little extra effort and consideration of the local dynamics may pay off with those fund managers eager to diversify, or those looking for new opportunities if and when the market re-adjusts to China fever.
Tourist Information
conference facilities
Conrad International
Pacific Place, 88 Queensway, Admiralty
Tel: +852 2521 3838
Fax: +852 2521 3888
Furama Hotel
1 Connaught Road, Central
Tel: +852 2525 5111
Fax: +852 2845 9339
Island Shangri-La
Pacific Place, Supreme Court Road, Central
Tel: +852 2877 3838
Fax: +852 2521 8742
JW Marriott Hotel
Pacific Place, 88 Queensway, Admiralty
Tel: +852 2810 8366
Fax: +852 2845 0737
Mandarin Hotel
5 Connaught Road, Central
Tel: +852 2522 0111
Fax: +852 2810 6190
Where to stay
Conrad International
Central Hong Kong
Tel: +852 2521 3838
Fax: +852 2521 3888
Grand Hyatt
Wanchai
Tel: +852 2588 1234
Fax: +852 2802 0677
Island Shangri-La Central Hong Kong
Tel: +852 2877 3838
Fax: +852 2521 8742
Mandarin Hotel
Central Hong Kong
Tel: +852 2522 0111
Fax: +852 2810 6190
New World
Harbour View, Wanchai
Tel: +852 2802 8888
Fax: +852 2802 8833
Ritz-Carlton
Central Hong Kong
Tel: +852 2877 6666
Fax: +852 2877 6778
California
Ground Floor, California Tower, 24-26 Lan Kwai Fong, Central
Tel: +852 2521 1345
Where to eat
Gold East Lake Chinese Cuisine
California Eton Tower,
8 Hysan Ave, Causeway Bay
Tel: +852 2576 2008
Grissini
Grand Hyatt Hong Kong,
1 Harbour Road, Wanchai
Tel: +852 2588 1234
Fook Lam Moon Restaurant
Ground Floor, 35-45 Johnston Road, Wanchai
Tel: +852 2866 0663
Stanley's French Restaurant
86 Stanley Main Street, Stanley
Tel: +852 2813 8873
Where to g0
The Peak
(Take the Peak Tram from Central)
Temple Street Night Market (located in Kowloon)
Hong Kong Musem of Art
HK Cultural Center Complex, 10 Salisbury Road, Tsim Sha Tsui, Kowloon
Tel: +852 2966 8065
Hong Kong Museum of History
Kowloon Park, Haiphong Road, Tsim Sha Tsui, Kowloon
Tel: +852 2367 1124