The amount of resources a firm allocates to IR demonstrates how important the IR function is to that company; using that yardstick, Asia appears to be lacking in IR commitment. In its latest analysis, IR Magazine’s 2018 IR Resources report reveals the average Asian IR budget was $203,000 in 2018 – compared with $527,000 in North America and $466,000 in Europe. And, at just $57,000, the IR budgets of Asian small-cap companies are the lowest of any region covered by the research.
On the face of it, this looks like a massive disparity. It would seem to suggest that Asian companies place less emphasis on IR and, consequently, corporate access, than European or North American firms. Further investigation, however, reveals that things aren’t quite so straightforward.
For example, Asian senior management teams typically spend more time on IR – 56 days a year – than their counterparts in other regions: 47 in North America and 37 in Europe. And Asian CFOs spend six more days on IR than the global average.
The starkest picture of all is that while IR budgets for Asian small caps are the lowest of any region, an impressive 51 percent of Asian small-cap senior management members attend investor meetings. Many small caps have IROs who wear more than one hat, but it seems senior managers in Asia are all taking their turn to wear the IR hat when needed.
More for less?
If the nature of Asian IR cannot satisfactorily be characterized by budget alone, then what is really going on? Given the substantial involvement of senior management teams in the IR process at Asian firms, one has to ask whether this means companies are doing more for less in Asia. This would be a reasonable conclusion from the numbers alone and, on one level, it is true: the IR Magazine Global IR Salary & Careers Report 2018 reveals that North America has the highest IR salaries and Asia the lowest.
Ajaya Intaraprasong, assistant vice president of investor relations at Bangkok Dusit Medical Services, gives IR Magazine an interesting insight, indicating that a more-for-less approach may indeed be the case. ‘The [company IR] budget is spent on necessities, for things like roadshows, analyst ratings or special [investor] events,’ she explains. ‘We use the facilities of sell-side analysts to arrange group conference calls to communicate with buy-side investors. We also outsource the website.’
The issue of smaller budgets does seem to concentrate minds and get everyone involved in senior management in one big corporate access push. Pulkit Bhandari, an IRO at India-based RPG Enterprises and also the firm’s head of group corporate finance, says: ‘What I’ve seen is that budgets are more driven toward events and are lower in Asia compared with the western world – and that in turn dictates who can attend investor meetings.’
Adding insight into his own company’s approach, Bhandari says: ‘We create a very tentative budget for the year, which is needs-based. Those IR spends are centered around getting resources for investor presentations, for example, that we’ll be hosting domestically and internationally.’
Client targeting
Unraveling this further, another interesting distinction is that Asian IR professionals prioritize the engagement of their existing shareholders over the global trend of targeting prospective investors, according to IR Magazine’s IR Objectives & Challenges report. Only 58 percent of Asian IR professionals say they place targeting in their top three goals for 2018, compared with 76 percent of their North American counterparts and 80 percent of IROs in Europe who name this as their top priority. This could well relate to the budget issue – because less is likely to be needed if you are undertaking fewer targeting roadshows and investor events.
It’s an issue Intaraprasong returns to in terms of a need for an increase in IR in Asia. ‘I think, all in all, we need to spend more time on IR and communicating with investors, compared with developed markets,’ she says.
Similarly, for Jeannie Ong, director of the Investor Relations Professional Association Singapore and former head of IR at StarHub, there is still a corporate cultural shift needed toward IR at Asian companies. ‘IR, unfortunately, is still something some people [in Asian companies] feel is good to have, rather than a must-have,’ she says.
Or to put it more harshly, one Singapore- based portfolio manager says: ‘Asian firms have a lot to learn as far as IR is concerned. The typical IR person in Asia is someone junior and not in the loop, hence sometimes is a waste of time for us to talk to.’ Based on this, Asian IR has to step up its game.
Higher-premium IR
So it’s not surprising that IR Magazine’s Value of IR report reveals that the Asian investment community places more importance on, and assigns a far higher premium to, good investor relations than do its counterparts in the rest of the world. The point here is that when investors see good IR, it makes a real stand-out difference – so the function of effective IR is vitally important in Asia and its various growing capital markets, a point argued by Angela Campbell-Noë, senior partner at Tulchan Communications Asia.
‘Asian companies aren’t as well known as some of their European and US counterparts, so they have to spend a lot more time educating the market and potential investors about things other than their company,’ she explains.
‘Particularly in emerging Asian markets, there is country risk to consider, so it takes a longer period to close a transaction because investors need more time to get comfortable, not only with the company, but also with the country and the risks.’ Putting aside budgets and management involvement, then, what Asia really needs is more proactive, effective, market and investor-focused IR. And in that, Asia is no different from other parts of the financial world. Returning to the first principles of IR, Campbell-Noë contends that many of the challenges IROs face in Asia are in fact universal to the profession.
‘I genuinely don’t think there is Asian IR, European IR and American IR,’ she says. ‘There is best practice across investor relations. All companies are competing for the same investment dollar. Asian companies, in the same way as European and US companies, need to look at issues such as disclosure, transparency, data reporting, governance and compensation. And all companies should be held to the same [high] standards.’
This article was published in the summer 2019 issue of IR Magazine