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Attracting Foreign Investors IR Magazine Asia Summit 2003. Investor & Corporate Communications. Attracting Foreign Investors: Today’s Comments. The US Marketplace for Greater China equities The strategic elements of investor relations established prior to program implementation

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Attracting foreign investors ir magazine asia summit 2003

Attracting Foreign Investors

IR Magazine Asia Summit 2003

Investor & Corporate Communications


Attracting foreign investors today s comments
Attracting Foreign Investors: Today’s Comments

  • The US Marketplace for Greater China equities

  • The strategic elements of investor relations established prior to program implementation

  • Elements of a successful international

    IR program.


US Investment in Foreign Equities Totals US$1.3 Trillion or 11% of Total US Investments

ADR and Local Shares

Source: Federal Reserve


Greater China: 48 percent of MSCI 11% of Total US Investments

Source: MSCI EMF Index


Top US Investors in Greater China 11% of Total US Investments

401 US institutions invested US$18.1 billion

in the 170 constituents of the MSCI China, HK, TW Indexes

Total Equity

# of

% of Total

Assets

Institutions

Investment

(US$ trillion)

Size of the Institutions (Equity Assets)

27

45.7%

3.6

Group A: Between 50 billion and 500 billion

79

39.6%

1.8

Group B: Between 10 billion and 49.9 billion

97

8.8%

0.5

Group C: Between 2 billion and 9.9 billion

38

1.3%

.06

Group D: Between 1 billion and 1.99 billion

6.1

160

1.6%

.05

Group E: Below 1 billion

401

100%

Total

Source: MSCI, 13 F Filings and Breakstone&Ruth


The us decision makers international securities
The US Decision Makers: International Securities 11% of Total US Investments

Sell-Side

Investors – Buy Side

Influencers

C

O

M

P

A

N

Y

M

E

D

I

A

Industry

Analysts

Institutional

Portfolio

Managers

Salesmen

Traders

Analysts

Portfolio Managers

US, Europe

Asia

US , Europe

Asia

Asia

US, Asia, Europe

1000-1200

600 - 700

1-150

Individuals

Salesmen

US

US


What it takes
What It Takes 11% of Total US Investments

  • Measurable objectives consistent with corporate strategies

  • A clear set of operating principles

  • Good disclosure practices

  • A well defined, consistent information and marketing program

  • Measurement and constant refinement

Create

A Strategic IR Program


Build objectives to support the corporate strategy
Build Objectives to Support the Corporate Strategy…. 11% of Total US Investments

For example, A corporate strategy might include:

  • Extensive money raising activities for product development or growth

  • An active acquisition strategy that requires a strong share price

  • The need to establish a global positioning to balance cash flows

  • A diversified shareholder base to avoid concentration and possible takeover


Which translate into measurable ir objectives
Which Translate Into Measurable IR Objectives 11% of Total US Investments

.

  • Increase institutional ownership

  • Broaden sell side coverage

  • Improve liquidity and trading volume

  • Improve market perceptions

  • Modify the retail/institutional ownership balance

  • Create awareness and visibility in a new market

    Bottom line the goal is to increase demand to support the share price


Adhere to a core set of operating financial communication practices
Adhere to a Core Set of Operating, Financial, Communication Practices…..

  • Timely, credible forecasts consistently met

  • Visible financial controls

  • Performance predictability

  • Strive for transparency

  • Identify earnings drivers and articulate milestones

  • Information consistent and management available

  • Long term strategic focus

  • No surprises

  • Effective management of expectations

  • Recognize the value of brand equity


Address cultural differences
Address Cultural Differences…….. Practices…..

  • Return investor calls in timely manner

    • Address time zone issues

      • Utilize U.S. IR firm

      • Have someone on call during U.S. market hours

  • Ensure primary shareholder contact is fluent in English

  • Educate investor base on cultural differences

  • Communicate about economic and political issues in China

  • Explain Chinese companies’ management structure and the role of the CEO

  • Prepare management for direct US style questions


And focus on what investors want
And Focus on What Investors Want Practices…..

  • Compelling, demonstrable stories that promise future results

  • From companies they trust to deliver

    • Clear value relative to the market, competitors

    • A well defined peer group

    • Visible unique characteristics that differentiate

    • Credible and accessible management

    • Communications that speak to their financial interests

    • On their expectations

  • Companies with dominant positions in their markets or strong niche players


Maintain disclosure broadly disseminate news
Maintain Disclosure: Broadly Disseminate News… Practices…..

  • Press Release Dissemination

  • Use financial wires to distribute press releases

    • Issue releases to U.S. investor circuit

    • Translate into English

    • Meet disclosure requirements

    • Automatically post press releases on Bloomberg and major financial portal sites (i.e. Yahoo, MSN)

    • Monitored by news media – generate coverage

  • Distribute releases via e-mail/ fax to investor lists

    • Current Shareholders

    • Target List

  • Understand and get advice on new SEC, SOX disclosure requirements


Maintain an informative website
Maintain an informative Website…. Practices…..

Web Site

  • Communicate with investors 24/7 across all time zones

  • Keep website current

  • Disseminate Vital Information

    • Press Releases

    • SEC filings

    • Historical financials

    • Management and Board of Director bios

    • Presentations and conference calls

    • Investor Contact

  • Address corporate governance

    • Guidelines

    • Code of ethics

    • Insider transactions


And support disclosure through direct contact
And Support Disclosure through Direct Contact Practices…..

Quarterly Conference Calls

  • Opportunity to discuss highlights of quarterly earnings

  • Address company and industry trends/ concerns

  • Can give Revenue and/or EPS guidance

  • Address negatives and resolutions if they are important

  • Answer all investor questions

    One-on-one Meetings

  • Allow investors to meet management

    • Develop relationships

    • Build shareholder confidence

  • Information discussed must already be public


Strategic preparation before communicating
Strategic Preparation Before Communicating Practices…..

  • Understand the US market before communicating

    • Interview analysts and portfolio managers

    • Analyze what US media says about China

    • The objective is to understand how international investors view

    • your company, how they interpret your information

    • And how it differs from what you know

  • Assess your peer group

    • Identify equity competitors or companies with similar

    • investing characteristics who are competing for

    • US investment dollars

    • Understand their investment message

    • Look for advantages


Deliver a memorable message
Deliver a Memorable Message…… Practices…..

  • Prepare a strong message that communicates

  • your investment appeal

    • Simple and easy to remember

    • Reflects your relative strengths and earnings drivers

    • Differentiates the company from competitors

    • Takes existing perceptions into consideration

    • Answers the question, Why buy this stock?


And understand current prospective investors
And Understand Current & Prospective Investors Practices…..

  • Identify your current shareholders

    • Understand them as you might key customers

    • Know investment criteria, trading patterns, valuation methods

    • Develop a data base for information distribution and to

    • track investor contacts

    • Use information supplied by the ADR banks, purchase data bases

    • or rely on consultants


The buy side
The Buy-side……. Practices…..

How They Are Similar

  • Demand management’s time

  • Seek increasing shareholder value

  • Always fall back on the numbers

    How They Are Different

  • Investment style and type

  • Number of issues in portfolio

  • Asset allocation

  • Sector allocation

  • Rate of return

  • Time horizon


And their various investment styles
And their Various Investment Styles…. Practices…..

  • Growth – Concentrates on companies with earnings growth well above S&P.

  • Value – Seeks stocks undervalued by market relative to asset value, growth rates, etc.

  • GARP – Growth at a reasonable multiple

  • Momentum – focuses on groups of stocks that are moving – short-term

  • Technical – Follow charts and other technical analysis of market

  • Index – Attempts to mirror the performance of an index

  • Income – Seek dividend income better than quality bond yields –


Facilitate institutional targeting to create meet and sell your target universe

Practices…..

Facilitate Institutional Targeting to Create, Meet and Sell Your Target Universe

  • Research your company

  • Identify a peer group of investment comparables

  • Analyze the peers for prospective investors

  • Target other prospective investors

  • Screen prospective investors

  • Prepare a qualified list

  • Arrange meetings

  • Non-deal road shows

  • Three to four times a year

  • Follow-up


Support Contact Through Written Material & Media Practices…..

  • Strong investor presentation

  • Fact sheet geared to the interest of the financial community

  • Annual and interim reports

  • White papers enhance understanding of a product or situation

  • Meetings with key international reporters

  • Articles in the international business or financial press


Summary Practices…..

  • Be prepared before you communicate

  • Create the right context for telling your story

  • Knowing your audience makes you an active participant in one-on-one roadshows

  • Adhere to a strong, memorable message

  • Follow up after the meeting is the key to success

  • Continue to add new targets expand your horizons

  • Make investor relations important in your company

  • Get Board backing for a solid program and keep them updated

  • Position yourself as the one who understands the international markets and can provide feedback


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