As a cash equities liquidity drought across the region continues unabated, Asian investors appear to be favouring global companies with secondary listings in Asia, research from BNY Mellon Depository Receipts indicates.
The study uncovered a strong desire among institutional investors in Asia 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 but they still prefer to trade within the region.
“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.”
The bank conducted 40 interviews with investors in Hong Kong, Singapore and China, the total of which managed more than US$60 billion in equity assets. Respondents included 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.
BNY Mellon said for issuers, a regional dual-listing increased both the local investor’s awareness of non-Asia-domiciled companies and the likelihood institutions in Asia would invest in them. Around half the investors surveyed (53%) said an Asian exchange secondary listing increased the chances they would invest in foreign-domiciled companies.
“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.
When questioned by BNY Mellon, local Hong Kong and Singapore investment firms were the most definitive in asserting a local listing increased their likelihood of investing in a foreign company, with 57% responding affirmatively and 62% saying a listing in Asia increased their awareness of a company.
But within Asia, investors were agnostic about local exchanges. Over half of the respondents questioned (61%) did not differentiate between regional exchanges in Asia where foreign companies have secondary listings.
“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.