What do you expect the impact of Mifid II to be on corporate access and research in the Asia-Pacific region? How aware do you think IROs in the region are of the potential impacts?
Asia will definitely see corporate access changes post-Mifid II as a lot of the European investment banks will have to implement global standards in the way they conduct their business. Global bank revenues will be affected and this will also directly affect the size of the research and corporate access teams.
Spark Plus feels companies in the small and mid-cap space will have even less coverage as banks lay off staff when they feel the squeeze over commissions. And we have already started to see changes in the region on the research front where independent research houses are being set up with various different business models that charge either the buy side or the corporates for written research.
IROs in Asia – especially in the emerging and frontier markets – feel Mifid II won’t affect them, though. In a lot of the frontier markets the broker pays for the corporates’ accommodation and flights and does the roadshow. The corporate pays absolutely nothing for that service. Companies that are willing to pay for corporate access have mainly come from developed markets in the region such as Australia, New Zealand and Japan. Corporates in these countries are now increasingly paying specialist providers to conduct roadshows and even write research on them.
Companies are also realizing they need to diversify their shareholder register and move away from having an extremely domestic focus.
What other regional trends are you seeing around corporate access or investor feedback?
Investors in the Asia-Pacific region – especially the family offices and small and mid-sized hedge funds – are not getting enough corporate access in the region. If you are a small hedge fund, you may be using only one broker and you will be invited to that specific broker’s roadshows or corporate access events only, while most family offices in the region use a private bank and rarely get invited to traditional investor events.
What are the top three issues investors want to talk about with corporates across the countries you cover?
1. A lot of corporates in Europe that we have dealt with come to Asia once a year and don’t have consistent communication with their Asian investor base. Investors want to meet with corporates on a more regular basis so they can take a view on management.
2. Investors may not have the supporting research coverage on many corporates that we bring to roadshows. A lot of the region’s small and mid-caps have poor coverage and some also have very poor corporate governance. This can be quite extreme in some of the frontier markets we have dealt with where some of the corporates don’t even have the basics like an investor presentation or IR contact on their website.
3. Investors sometimes also struggle with getting information on some of the frontier markets we deal with. The CEO, CFO or IRO may not speak the same language, and the investor presentation may not be translated into English, so this makes it very difficult for the investor to take a view on the company and get a good understanding unless there is some additional support on that front.
Finally, what tips would you offer IROs from Europe or the US looking to go on a roadshow to the Asia-Pacific region for the first time?
Asia is a very relationship-driven place and a lot of European and US IROs focus only on seeing institutional investors, often ignoring the family offices, hedge funds and wealth manager segments, which is where a corporate access specialist can make a real difference to the schedule.