Asia s Evolving Investment Landscape

Transcription

1 Asia s Evolving Investment Landscape Considering Hong Kong, Mainland China and Singapore as Investment Sources May 2012

2 Asia s Potential, At a Glance T he McKinsey Global Institute projects that by 2020, China s financial assets could reach $65 trillion1, which would account for nearly 59% of all emerging market assets (and 18% of the global total). T oday, institutions from Hong Kong, China and Singapore manage approximately $940 billion in equity assets. Over the past five years, this total has grown at a 25% compound annual growth rate (CAGR)2. C urrently, Asian investors allocate roughly 15% of equity assets to non-asian-domiciled companies. Comparatively, North American and European investors allocate 25% and 39%, respectively, to global equities beyond their borders. As the portfolios of Asian investors become more globally diversified, each additional percentage point of diversification will be significant, representing approximately $7.3 billion in equity assets3. N early half of the Asian institutional investors interviewed for this study plan to increase their investment outside of Asia over the next five years. 1 The emerging equity gap: Growth and stability in the new investor landscape, The McKinsey Global Institute, December CAGR is an annualized growth rate over a specific period of time, in this case five years, that adjusts for outliers. Ipreo 3 Based on current reportable AUM in Hong Kong, China and Singapore Q1 2012

3 Content Study Background 1 Investment Market Analytics 4 Asia s Leading Investors 6 Buy-side Insight 8 Summary and Recommendations 13 Asian Investor Snapshots 14 Contacts 15

4 Global Issuers Increasingly Trending towards Asia Nearly one in three (31%) mega-cap companies from developed markets indicate an interest in an additional listing in Greater China, up from 28% in Secondary listings are of interest to one in five companies around the world, with companies ranking Hong Kong and China as the most popular destinations for such a listing. Three of the top five most frequently engaged Sovereign Wealth Funds (SWFs) in the world are based in Asia Government of Singapore Investment Corporation, Temasek Holdings, China Investment Corporation Ltd. Source: Global Trends in Investor Relations, BNY Mellon, October 2011

5 Study Background When looking at today s global landscape, there is no denying the growing economic might of Asia particularly that of China. This growth has been steady and significant; in fact, the International Monetary Fund predicts that by 2017, China will overtake the United States as the world s largest economy (at purchasing-power parity) 5. This dynamic presents several considerations for global issuers seeking to create opportunities from this expanding region primarily how to best position themselves for potential inflows from Asian investors in the future. With the region ripe with possibilities, global corporates are deliberating: What proportion of our shareholder base could ultimately be based in Asia? Would an Asia-based secondary listing provide access to deep pools of new capital? How can our investor relations (IR) activities help accelerate our business strategy in these growth markets? Recognizing Asia s potential as a viable, growing source of institutional investment, BNY Mellon undertook a market study to acquire an informed snapshot of today s investment practices and gauge investor outlook. We examined the potential opportunities to be realized from investor marketing, as well as those that could be garnered from an exchange listing in Asia. Investment centers in Japan and Australia represent large portions of the Asian investment landscape; however, the focus of this report centers on Hong Kong, Singapore and China, as these markets appear to be the primary destinations for companies considering a secondary listing. We are pleased to provide the resulting intelligence and direct market feedback to help you assess what steps to take to effectively capitalize on Asia s ongoing growth. Our Approach We analyzed all reportable equity assets within Hong Kong, Singapore and China in order to provide quantifiable metrics to the region s investor base. This analysis was complemented with in-depth interviews of 40 investors in the aforementioned markets representing over $60 billion equity assets under management (AUM). The purpose of the interviews was to gain background information and sentiment on relevant issues. We split the interviews evenly over the three above geographies, while also giving balance to the type of investor, namely: 1) Mainland Qualified Domestic Institutional Investors (QDIIs), 2) Hong Kong and Singapore headquartered investment firms and 3) Hong Kong and Singapore based subsidiaries of global asset management firms. Through these discussions, investors directly provided their views on relevant issues, such as appetite for global equities (non-asian), the impact of a local listing on investment decisions, and expectations for first-time meetings with companies from outside the region. By reviewing various sources of objective market data and interviewing investors to ascertain their current and future investment practices, we gained a solid understanding of where Asia s investment climate stands today and where it is headed. Note: Although limited in number, SWFs in Asia, such as China Investment Corporation (CIC), State Administration of Foreign Exchange (SAFE), GIC Asset Management, and Temasek Holdings, have an outsized role in the region in terms of the investments made in global equities. While the focus of this paper is on traditional institutional investors, the portfolios of Sovereign Wealth Funds (SWFs) are included in the ownership data that follows. 5 International Monetary Fund, World Economic Outlook Database, April 2012 All numbers are quoted in U.S. dollars. 1

6 How Should Asia Fit into Your Capital Markets Strategy? As companies around the globe increasingly recognize Asia as a region meriting additional attention, they have begun to consider incorporating Asia into their strategic planning. Common themes and questions include: Should I go on a non-deal road show to Asia? Does senior management need to attend an initial meeting? What topics should be covered in my presentation? Are local institutions expanding their investments in global equities? Have investors in Mainland China begun investing outside of their home market? Meeting with Investors in Asia: To Go or Not to Go? It is important to frame the assessment of investment opportunities in Asia from a long-term perspective as it takes time to grow a new investor base. By most accounts, visiting investors in Asia can be a worthwhile endeavor as companies seek to cultivate new relationships and begin the groundwork for new investment by Asian investors. Taking into account the immediate costs of conducting investor meetings in Asia, as well as the long-term potential benefits, companies should consider the following: While many institutional investors remain focused only on Asian equities, the survey revealed a trend toward equity allocations becoming more global. Nearly half of the investors we surveyed have plans to increase their rate of investments outside of the region over the next five years, citing client requests and portfolio diversification as the driving factors. Although not required for globally-focused investors, it helps to have revenue derived or operations within Asia to attract the interest of investors that have a more Asia-tilted equity portfolio. The institutional investment community s assets are currently highly concentrated, with SWFs commanding a large percentage of identifiable assets according to Ipreo. Mainland China investors that have received government approval and quotas to invest in foreign equities (known as QDIIs*) continue to move slowly in regard to putting their quotas to work through actual investments. Historically, there has been a lack of transparency and disclosure with respect to QDII investments. Since the QDII community has traditionally not disclosed its future investment strategies. Nonetheless, several QDII respondents in this study indicated an interest in global diversification. 2 * QDII refers to a China qualified domestic institutional investor which has approval from the China Securities Regulatory Commission (CSRC) or China Banking Regulatory Commission (CBRC) to raise funds in Mainland China and to use the proceeds to invest offshore through a quota granted by the State Administration of Foreign Exchange (SAFE).

7 How Can We Maximize the Effectiveness of Investor Meetings in Asia? Nearly every institutional investor, regardless of location, places a high level of importance on face-to-face meetings with senior management, and Asia is no different. However, investors in Asia understand the difficulty and time commitment required for senior management to travel to the region on a regular basis. In fact: 52% state that meeting with a well-informed investor relations officer (IRO) in lieu of a senior management representative is sufficient. 55% of respondents report that they are not required to meet senior management before investing. These are important findings, as a first-time road show to Asia conducted exclusively by an IRO is not only an effective use of time, but can also serve as an important fact-finding trip to enable an informed decision on senior management s presence on future trips. Investors in the region prepare and conduct research on companies prior to meetings in order to gain an understanding of the companies financials. The respondents in the survey emphasized their desire to use an initial meeting to understand a company s strategic differentiators and to gain a general introduction to the company: 72% of respondents rank the understanding of strategic differentiators as their first or second expectation from a meeting. The requirement ranked third is a general company introduction. Only 30% of respondents rank a review of financials as a first or second priority. These results suggest an IRO should feel confident that preparing for and conducting investor meetings in Asia would present a less arduous task than initially expected. As investors are prepared for meetings they do not necessarily need to meet with senior management. Should We Establish a Secondary Listing on an Asian Exchange? The decision to have a secondary listing on an Asian exchange, such as Hong Kong or Singapore, is a significant one for any company. It is clear from our research that a listing on a regional exchange enhances a company s opportunities to gain investment from the region as: 62% of the institutions surveyed state that a listing in Asia would increase their awareness of a company of the survey respondents directly note that a listing in Asia would actually increase the likelihood of making an investment Another important finding is that Mainland QDIIs, Hong Kong and Singapore headquartered investment firms and Hong Kong and Singapore based subsidiaries were uniform in their comments on these points, indicating to the conclusion that a listing in Asia opens up opportunities to investors who, until now, have had equity portfolios dedicated exclusively to Asia. 3

8 Investment Market Analytics Equity Asset Centers The map below highlights the level of equity investment emanating from Asia s major money centers, which is key information to know when assessing the market. As noted earlier, the assets depicted cover traditional investment managers and SWFs. Additionally, the equity investment information below is based on reportable assets disclosed by institutional investors and investment funds. Due to the lack of uniform ownership disclosure rules, the ownership data presented throughout the paper should not be considered comprehensive; however, it does provide context for comparisons between money centers and allows for the analysis of trends. INDIA Mumbai $94.1 CHINA and HONG KONG Guangzhou $20.0 Beijing $398.0 Seoul $74.9 Shanghai $62.3 TAIWAN Taipei $19.4 Shenzhen $50.5 Hong Kong $152.3 SOUTH KOREA JAPAN Tokyo $422.2 SINGAPORE and SOUTHEAST ASIA Kuala Lumpur $94.1 Singapore $227.3 Source: Ipreo Q1 2012, all numbers based in US billions Institutions from Hong Kong, China and Singapore manage approximately $940 billion in equity assets, most of it actively. Equity assets by firm location are segregated as follows: 57% in China, 26% in Singapore, and 17% in Hong Kong. China also boasts the largest number of firms, but a significant percentage of these money managers are not permitted to invest outside of Mainland China according to Ipreo. Institutions based in Hong Kong and Singapore allocate a large percentage of equity assets to Asia-based companies: 85% of Hong Kong based investment is allocated to Asian equities 77% of Singapore based investment is allocated to Asian equities The potential for increased future foreign investment from the region is significant, though, as investors that currently allocate at least 1% of their portfolio to foreign equities control $650 billion in combined equity assets. Disclosed institutional assets are highly concentrated due to the huge impact of SWFs: In China, SWFs control 92% of equity assets - China Investment Corporation: $287.2 billion - State Administration of Foreign Exchange: $12.5 billion 4 In Singapore, SWFs control 58% of equity assets - Temasek Holdings: $86.4 billion - GIC Asset Management: $29.3 billion

9 Growth in Global Investing Although their investments in non-asian companies are still vastly outweighed by their investments in Asian companies, investors in Asia have continued to increase the global aspect of 70 their portfolios, particularly since the beginning of 2008 and the onset of the global financial crisis Total Global Investment Excluding Asia Value ($B) Value ($B) /31/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11 9/30/ /30/08 12/31/08 6/30/09 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 Security Region 10 North America Europe Latin America 0 3/31/08 9/30/08 3/31/09 9/30/09 3/31/10 9/30/10 3/31/11 9/30/11 6/30/08 12/31/08 6/30/09 12/31/09 6/30/10 12/31/10 6/30/11 12/31/11 Security Region North America Europe Latin America Source: Ipreo Q Global Equity Ownership by Sector Investment in the Financials sector, which is the sector most favored by investors in the region, is primarily the result of significant stakes in foreign banks taken by SWFs. Global Investment by Sector Excluding Asia % of Total Equity Assets % of Total Equity Assets 50% 45% 40% 35% 30% 50% 25% 45% 40% 15% 35% 10% 30% 5% 25% 0% Basic 15% Materials 10% Source: 0% Ipreo Q Basic Materials Consumer Goods Consumer Services Energy Sector China 5% Hong Kong Europe Singapore Consumer Goods Consumer Services Energy Sector China Hong Kong Europe Singapore Financials Healthcare Industrials Technology Utilities Financials Healthcare Industrials Technology Utilities 5

10 Asia s Leading Investors Getting to know the institutional investors in Asia is a key component to including them in your IR plans. For your convenience, here we present the top institutional investors in Asia based on global equity investments. The top of the list is dominated by the region s four major SWFs, which are then followed by subsidiaries of U.S. and European institutions. Note that the portfolio turnover rates are at levels that indicate a long-term investment philosophy. Investor Name Country Equity Assets ($M) % Portfolio Turnover Value Ex. Asia Securities ($M) Value Asia Securities ($M) 1 GIC Asset Management Pte., LTD Singapore 29, % 20, , Temasek Holdings Pte., LTD Singapore 86, % 13, , State Administration of Foreign Exchange (SAFE) China 12, % 12,509.3 N/A 4 China Investment Corporation, LTD (CIC) China 287, % 9, , Templeton Asset Management, LTD Hong Kong 16, % 5, , Templeton Asset Management (Singapore), LTD Singapore 22, % 5, , Fidelity Management & Research (Hong Kong), LTD Hong Kong 6, % 3, , Aberdeen Asset Management Asia, LTD Singapore 31, % 3, , State Street Global Advisors Asia, LTD Hong Kong 6, % 1, , Northern Trust Global Investments (Hong Kong) Hong Kong 1, % 1,109.0 N/A 11 Eastspring Investments (Singapore), LTD Singapore 6, % , HSBC Global Asset Management (Hong Kong), LTD Hong Kong 6, % , T. Rowe Price Singapore Pte., LTD Singapore 1, % JF Asset Management, LTD Hong Kong 19, % , China Asset Management Corporation, LTD China 16, % , RCM Asia Pacific, LTD Hong Kong 2, % , Legg Mason International Equities (Hong Kong), LTD Hong Kong % Nomura Asset Management (Singapore), LTD Singapore 1, % HSBC Global Asset Management (Singapore), LTD Singapore 3, % , Parametrica Management, LTD Hong Kong % Source: Ipreo Q

11 Asset Allocation Around the World The graph below depicts a clear home-market bias that exists in every region, but highlights that the proportions for each region are not identical. While North American investors hold roughly 75% of their assets in North American securities and European investors hold 61% in European securities, Asian investors hold an overwhelming 84% in Asian securities. 6 As Asian investors move toward the diversification patterns of their peers in Europe and North America, holdings outside of the region will potentially increase by $7.3 billion for each percentage-point increase in global asset allocations. Asset Allocation by Geography 100% 90% 80% 4.0% 6.1% 4.2% 8.1% 12.8% 13.0% 70% 60% 50% 61.3% 84.3% 40% 74.9% 30% 10% 19.8% 5.3% 0% N. America Europe Investors by Region 6.2% Asia North America Europe Asia Other Source: Ipreo Q Ipreo, based on 1.0% of the current equity assets of all Asian domiciled mutual funds, totaling roughly $723 billion. 7

12 Buy-side Insight Yes, a company must have some sort of operations, revenues, or brand presence in APAC in order for us to consider an investment. We have a focus on companies that operate in the APAC region or are listed on a regional exchange. Hong Kong Based Subsidiary We are focused on growth because we are a long-only fund. We are focused on fundamental analysis. We evaluate a company s outlook and the resulting impact on earnings. A company does not need to have operations within Asia in order for us to make an investment. A company can have operations anywhere. We just look for quality companies. Hong Kong An important factor in understanding the Asian investment landscape is understanding investor perceptions and plans. Looking at longstanding investing habits does not convey the shifts that may be occurring in investors strategic plans and outlook. Due to this fact, our study includes direct feedback from the buy-side in Hong Kong, Singapore and Mainland China on various investor relations topics. Of course, institutional investors differ from each other in a variety of ways; nevertheless, the feedback from the following survey statistics provides practical insights on how to approach and meet expectations of investors in the region. Investment Landscape: Asia A majority of investors in Asia have investment mandates that focus on companies domiciled within China or its neighboring countries. It is especially important to many of these investors that a company has operations in Asia or, at minimum, revenues that are derived from the region, in order to be a viable investment opportunity. However, even with that restriction, there is a sizable population of investors domiciled within Asia that have a global investment mandate. In fact, nearly half of these investors can consider equities from all countries as long as they present strong investment theses. Does a Company Need to Have Operations or Revenues in Asia For You to Invest? 54% 46% We are moving in a direction to increase the rate of investment outside of Asia. In the long term we are striving to increase our global mandate. We want to diversify our business further. Hong Kong We plan to increase our rate of investment outside of Asia in the future. Most of our growth will be outside of Asia. It is definitely something that we will look at. Hong Kong Yes No Notably, nearly half of the overall investment community reports that it plans to increase its rate of investment in companies domiciled outside of Asia over the next one-to-five years which is in line with the number of investors permitted to invest outside of Asia. So although many investors in 47% Asia are limited by investment mandates and are therefore unable to consider global equities in their portfolios, those without such restrictions appear to be interested in expanding global portfolio diversification. 46% These Yes investors No 54% cite client requests, portfolio diversification, opportunities for growth and returns as the contributing factors for their plans to increase investment outside of the region. 17% Do Yes You Have Plans No to Increase Your Rate of Investment Outside of Asia? 21% 62% Yes No Mixed Opinion Yes No Mixed Opinion 47% 29% 18% Yes No 8 39% 8% 17% 29%

13 A local listing on an Asian exchange definitely increases our awareness of a company. The improved transparency and ability to access information increases investor awareness. A local listing leads to a bigger pool of investors taking a look at the company. Singapore Based Subsidiary A local listing makes it possible for us to invest in a company. There is a lot of money to be put to work in Asia, so it is obviously beneficial for a company to be able to open the doors for those investors. We want to see firms open up here. Hong Kong The specific Asian exchange does not influence my investment decision because both the Hong Kong and Singapore exchanges have international jurisdiction and corporate stewardship regulations that make them essentially identical. Hong Kong I do not differentiate between the Hong Kong, Singapore, and any other Asian exchanges. The company simply has to be listed on one of the regional exchanges for us to invest in it. Hong Kong Based Subsidiary Impact of a Secondary 46% Listing on a Regional Exchange by a Company Outside of Asia 54% Due to Asia-only investment mandates, familiarity, and knowledge of the area, many investors in Asia focus their portfolios and funds on equities from regional exchanges and only consider investment opportunities that fall within that universe. In fact, 62% of the population states that Yes No a secondary listing on a regional exchange by a company domiciled outside of Asia increases their awareness of a company. Not only are their time and research heavily allocated toward equities from regional exchanges, so are their investments, as of these investors state that a secondary listing on a regional exchange increases the likelihood that they would invest in a company domiciled outside of Asia. 47% Does a Secondary Listing 46% on an Asian Exchange: Increase Yes Your Awareness No of a Company? Yes 54% No 62% 17% 21% Yes No Mixed Opinion 47% Increase the Likelihood of Investment? While many investors in Asia are focused on regional exchanges, the specific regional exchanges do not have a large influence on their investment decisions. Over half of the population does not differentiate Yes No between the regional exchanges, with the quality and underlying fundamentals of a company considered more important than the specific exchange listing. They also assert that it is important for a non-asian 8% 39% company to list on an Asian exchange mainly to be included in their 17% 29% investment universe, not necessarily for reasons that are specific to the exchange. Of those investors who 21% differentiate between the regional exchanges, sentiment of the Hong Yes No Mixed Opinion 18% 62% Kong Stock Exchange is the most positive because it is considered to be liquid, transparent, and a gateway to China. Yes No 55% Mixed Opinion Yes No 48% Mixed Opinion Does a Specific Asian Exchange Influence Your Investment Decision? 45% Yes No Yes No 8% 39% 29% 18% Yes No Mixed Opinion 52% Yes 35% No Mixed Opinion 35% 27% 55% 3% 48% % 52% 9

14 Yes, I may be encouraged to consider investing in a nonregional company if it listed on a regional exchange in Asia. Prada would be an example. The company listed in Hong Kong, which is interesting. These companies are increasing their exposure in Asia and are the leading global companies. That is why I pay a little bit more attention to those companies. I would be less familiar with a company that does not list on the regional exchange. Hong Kong I would be more likely to invest in a company if they have a local listing on a regional exchange. A local listing does not make a company more attractive, but it increases coverage and causes the company to need to travel to this part of the world more often. A local listing increases the number of choices we have to make an investment in. It is obviously easier. Singapore Based Subsidiary A local listing will obviously increase the likelihood that we would invest in a company outside of APAC. Because of our mandate we can only invest in companies within APAC, so if a company wants to be a viable opportunity for us it must have a local listing Hong Kong Based Subsidiary The following graphs based on the survey results represent the impact of a secondary listing on a regional exchange, broken down by constituency: Does a Secondary Listing on a Regional Exchange: Increase Your Awareness of a Company? Mainland QDIIs 60% 60% 60% Increase the Likelihood of Investment? Yes No Mixed Opinion Yes No Mixed Opinion Hong Yes Kong and NoSingapore headquartered Mixed Opinion investment firms Yes No Mixed Opinion Yes No Mixed Opinion Yes No Mixed Opinion 62% 62% 62% 23% 23% 23% 15% Yes No Mixed Opinion Yes No Mixed Opinion 67% 15% 15% 33% Yes No Mixed Opinion Yes No Mixed Opinion The breakdown by constituency highlights that Mainland QDIIs, Hong Kong and Singapore headquartered investment firms, and Hong Kong and Singapore based subsidiaries universally see benefits in a secondary listing in Asia. Assumptions that these investments are only handled through Western-European or U.S. funds prove to be false. Accordingly, each of the three constituencies presents a distinct opportunity. Notably, QDIIs are least affected by a secondary listing with regard to their likelihood of investment; however, a majority of these investors would have more awareness of a company with a listing in Asia. It is assumed that Hong Kong and Singapore headquartered investment firms focus on companies and exchanges in Asia, so they are most likely to be impacted positively by a secondary listing. 57% 40% 50% 40% 29% 29% 29% 14% Yes No Mixed Opinion Yes No Mixed Opinion Yes No Mixed Opinion Yes No Mixed Opinion Hong Kong and Singapore based subsidiaries 25% 67% 67% 33% 33% 57% 57% 40% 40% 40% 40% 50% 50% 25% 25% 14% 14% Yes No Mixed Opinion Yes No Mixed Opinion Yes No Mixed Opinion Yes No Mixed Opinion 25% 25% 25% 10

15 Yes 54% No We meet with senior management before making an investment about 90% of the time. The only exception would be if the company is well-established and well-followed by the sell-side community. In this case, it may not be as urgent to meet with management before investing in the company. Hong Kong Most of the time we need to meet with IR rather than senior management of the larger companies domiciled outside of Asia. Management cannot take meetings all of the time, so we accept meetings with IR if they understand the full picture and are sufficiently kept in the loop. Singapore It is better to meet and talk to senior executives, such as the CFO. This is because the front line people, such as the IRO, are normally just message deliverers. They cannot speak firmly because they are only allowed to say what management allows them to say. Mainland QDII Meeting with an IRO is not sufficient because we prefer to speak with a CEO or CFO who can provide detailed responses to our questions. The IRO often cannot explain the numbers or the trends. Hong Kong Yes No 17% Investor Point-of-Contact Requirements 21% 18% 62% Understanding the logistical and scheduling difficulties involved, a majority of Asian investors do not require a one-on-one meeting with senior management of a non-domestic company before initiating a position, although they prefer it. Most investors request at least one meeting with senior Yes executives 47% No in order Mixed to Opinion assess their abilities and gain Yes an understanding No Mixed of the Opinion company s operations and strategic vision. Some investors will not meet with IR representatives as they require a meeting with senior Yes No executives before making an investment. However, more than half in Asia s investment community will accept a meeting with the IRO in lieu of senior management for informationgathering purposes as long as the IR team is able to knowledgeably discuss strategy, accurately 17% 29% address all issues and concerns, 8% and thoroughly answer investors questions. 39% 62% Are Yes You Required No to Meet Mixed with Senior Opinion Management before Investing Outside of Asia? Yes No Mixed Opinion 55% 45% 21% 8% Yes 39% No Yes No 18% Is Meeting with the IRO in Lieu of Senior Management Sufficient? A Yes majority of Noinvestors Mixed in Asia Opinion would like for management teams to regularly (at least annually or semi-annually) 35% travel through the region for meetings and informational updates. However, 35% investors understand that because of distance they must rely heavily on organized conferences, analyst/investor events, and presentations to obtain corporate information. 55% 27% 48% Many of these investors report that as long as they can correspond with management 3% throughout the year when necessary, face-to-face meetings are not vital to their decisionmaking 0 process 1 when 2 considering 3+ investment opportunities outside of 45% 52% Asia. 52% How Yes Many Times No a Year Would You Like to Meet/Correspond with Yes Management? No 35% 27% 35% 3% % Yes No Mixed Opinion 48% 11

16 In a first-time meeting, we will normally go over the company s operations, what the company does, the logistics of its operations, what its costs and growth plans are like, and how it generates revenues. It would not be extremely detailed in terms of financials, but I need to understand how performance advantages translate to the bottom-line. Hong Kong I do not need too much detail in an initial meeting. I really want to know about the strategy, because that represents the direction of the company and its development. It also shows how the company will compete in the market. That is what I care most about. Mainland QDII Generally, before we meet with a company, we will have done our own homework. We would have read through the recent news. We want an update on what the business has done. We also want to know about the pipeline and the future plans. We want time for Q&A and we want to understand management s philosophy and style. I like to know how the company differentiates itself. Singapore Most investors in Asia analyze financial statements before accepting a meeting with a company, and therefore use an initial meeting to learn about the strategic differentiators, meet and assess the members of management, and gain a general introduction to the company and investment thesis. Investors are most interested in spending an initial meeting getting to know management s strategic thinking on the broader sector and industry, how the company fits into that market, and how it differentiates in a way that will positively affect earnings and long-term profitability. What Are You Expecting From an Initial Meeting in Order to Make an Investment? (Ranked 1-5)* % of Mentions 60% 50% 40% 30% 10% 0% Strategic Differentiators Meet & Assess Management Company Introduction Review Financials Ranked 1st Ranked 2nd Ranked 3rd Ranked 4th Ranked 5th * Lowest Average Ranking = Highest Priority Q&A 12

17 Summary and Recommendations As a result of the depth of the potential equity pool and the expanding breadth of institutional investors open to investing in non-asian equity, BNY Mellon believes Asia has considerable potential for DR issuers from around the world. We encourage you to learn more about the opportunities this developing region presents. A summary of the factors behind our conclusion follows. Asia s investment trends are creating a growing opportunity Today, institutions from Hong Kong, China, and Singapore manage approximately $940 billion in equity assets. While a large percentage of investment mandates in Asia are Asia-only, there is still a meaningful population of investors in the region purchasing global equities. Asia remains under-diversified when compared to developed regions, and as it moves toward the investment patterns of more traditional markets, each additional percentage point of global diversification will equate to an additional $7.3 billion in equity assets.* Nearly half of Asia-domiciled investors have plans to increase their rate of investments outside the region over the next five years. Client requests, portfolio diversification and opportunities for growth and returns are the contributing factors for this decision. Consideration: As Asian markets continue to develop, companies domiciled outside of Asia should pursue consistent communication and outreach with Asian investors. This can generate interest in the company s story and garner potential investments in the future. A secondary listing on an Asian exchange by a company outside Asia can have substantial impact A local listing on a regional exchange universally increases both the awareness of the listed, non-asia-domiciled company and the likelihood that Asia-domiciled investors (QDIIs, Hong Kong and Singapore headquartered investment firms, and Hong Kong and Singapore based subsidiaries) will invest. The impact could be significant as more than half of these investors said such a listing would make them more likely to invest. Consideration: Due to certain Asia-only mandates that restrict investments to companies listed on local exchanges, companies domiciled outside Asia should consider a secondary listing on an Asian exchange to be included in that investment universe. Visits with investors in Asia should be an ongoing component of your IR plans While investors prefer to meet with senior management in person before initiating an investment, 55% are not required to do so before investing. Moreover, 52% are satisfied to meet with an IRO in general to discuss the company direction, strategy, and other key issues. During an initial meeting, Asian investors want to discuss the company s strategic differentiators, meet and/or assess the management team and gain a general introduction to the company. Consideration: Non-Asian companies should send executives to the region periodically to maintain consistent outreach and provide exposure to the appropriate thought leaders and decision makers. At minimum, companies should routinely send IROs to Asia as they are an effective representation on the company s behalf, keeping the company story top-of-mind for this valuable investor population. * Ipreo Q

18 Asian Investor Snapshots To provide an idea of the types of investors in Asia, following are brief snapshots describing select institutional investors in the region. Mainland China QDIIs Harvest Fund Management Company, LTD Equity Assets: $14,118.3 million Turnover: 24% Annually Harvest Fund Management was established in 1999 in Beijing, China. In 2005, the firm signed a joint venture agreement with Deutsche Bank to become a joint venture asset manager, making it one of the largest in China. The firm was one of the first Qualified Domestic Institutional Investors (QDIIs) in China after the license was granted to the fund in 2007, shortly after the State Administration of Foreign Exchange began the QDII program. China Asset Management Corporation, LTD Equity Assets: $20,703.4 million Turnover: 23% Annually China Asset Management Corp. is one of China s largest institutional investors, established in The firm manages money for the National Social Security Fund, as well as Corporate Annuities. In addition to traditional investment vehicles, the firm was also the first exchange-traded fund (ETF) manager in mainland China. In 2007, the firm became one of China s first QDII investors, allowing the company to invest a portion of its equity assets abroad. Hong Kong Value Partners, LTD Equity Assets: $5,558.2 million Turnover: 30% Annually Value Partners first opened its doors in 1993 in Hong Kong and is now one of the largest asset managers in the region. The firm manages a variety of investment products including long-term funds, long/short funds, ETFs and quantitative funds, as well as institutional and individual funds. Primarily focusing on Asian securities, Value Partners invests the majority of its assets in Hong Kong, followed by China. Singapore Fullerton Fund Management Company, LTD Equity Assets: $629.0 million Turnover: 33% Annually Fullerton Fund Management Company originally started as a division of Temasek Holdings, a Sovereign Wealth Fund (SWF) of the Singaporean government, in The firm became an independent local investor that manages a portion of Temasek Holdings assets, as well as third-party funds for institutional clients and individual investors in The firm is a Qualified Foreign Institutional Investor (QFII), allowing it to invest in Mainland China. Hong Kong and Singapore Based Subsidiaries Fidelity International Limited FIL Investment Management (Hong Kong), LTD Equity Assets: $17,929.4 million Turnover: 39% Annually Initially established in 1981, Fidelity International Limited - FIL Investment Management (Hong Kong) manages a portion of the Fidelity family of equity and fixed income funds. The firm also manages institutional equity and fixed income portfolios. It primarily invests in the Asian market, while leaving its international investments to the other Fidelity International Limited offices. With that said, Fidelity is a global company that shares research across the globe and information that is learned in one office is not exclusive to that branch. Templeton Asset Management (Singapore), LTD Equity Assets: $23,705.9 million Turnover: Annually Templeton Asset Management (Singapore) is a branch of Franklin Templeton Investments that opened its offices in Singapore in 1996, serving its primary purpose as the headquarters for emerging market investments. Currently, the firm is still in charge of its Asian emerging markets investments, while leaving its developed market investments to other Templeton offices. 14 Source: Ipreo Q1 2012

19 Contacts New York David Stueber Global Business Development Guy Gresham Global Investor Relations Advisory Team Leader - New York guy.gresham@bnymellon.com London Nadja Schliebener Global Investor Relations Advisory Team Leader London nadja.schliebener@bnymellon.com Alan MacAlpine Global Corporate Actions alan.macalpine@bnymellon.com Hong Kong Herston Powers Asia Pacific IR Specialist herston.powers@bnymellon.com 15

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