Friday, June 26, 2015: Hong Kong and Singapore may battle for bragging rights as Asia’s premier’s financial capital, but Australian companies seeking investors in both centres will need more than a smile and a well delivered pitch to succeed.
For many ASX-listed companies looking to attract capital from Asia, it can be easy to view the region as homogenous. But there are important variances that Australian companies must consider when conducting a roadshow or when looking to raise funds in the region – as the recent ASX Spotlight Conferences held in Singapore and Hong Kong has highlighted.
During my time at both conferences, I was fortunate to meet a number of small institutional fund managers, finance journalists, hedge fund managers, bankers and brokers, who provided important insights into what works and what doesn’t when targeting Singaporean and Hong Kong investors.
Pearl of the Orient? Or the Lion City?
Reflecting upon my meetings in Asia, I found that Hong Kong investors were more likely to invest in ASX-companies, buy stock stock at Initial Public Offerings (IPOs) and generally take risks on pre-revenue ASX-listed companies.
In contrast, Singapore is a more challenging environment for a small (under AU$200 million) ASX-listed company, with investors taking a more conservative approach when looking at ASX-listed stocks.
Some key points companies should consider before marketing to institutional investors in Singapore include:
- Your company should have a market capitalisation of at least $AU600 million and strong liquidity levels to get the attention of well-known institutional investors. One senior banker noted that there was only a small number of funds in Singapore that would look at Australian companies under $AU600 million;
- Many Singaporean investors do not have a deep knowledge of Australian sectors outside of resources, so do your research to ensure the investor you target invests in your sector; and
- Having said that, advisors in the region acknowledge that there is opportunity for smaller companies with family trusts and private investors (HNWs). These investors can be more flexible and they may be more open to small or microcap companies. For smaller companies wanting to market to Singaporean investors, be sure to build a network of HNW contacts and target conferences that attract this type of audience.
Some key points companies should consider before marketing to institutional investors in Hong Kong include:
- Compared to their Singaporean counterparts, Hong Kong investors are more open to earlier stage companies. Hong Kong investors value strong growth and are open to pre-IPO investing opportunities;
- There is genuine desire to learn about new opportunities, including Australian companies across the board;
- Currently investing in Australia is viewed as a hedging mechanism against other Asian markets.
Like many global institutional investors, those I met with in Hong Kong continued to emphasise the importance of robust corporate governance policies, high quality management teams and dividend policies for shareholders. And as you would expect, there is an expectation that relationships are built over the longer term.
Hong Kong and Singapore are bustling with investors and the region remains one of the most important financial hubs in the world. Australian small cap companies must be strategic and plan their road show to target investors relevant to the size, sector and stage of their company.
While the region presents challenges, by getting your timing right, finding an adviser with the right networks and targeting a variety of investors Australian small cap companies can ensure a successful investor roadshow in both cities.
For more information about targeting investors in Hong Kong and Singapore, please contact Annabel at AMurphy@buchanwe.com.au.