Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Thursday, December 06, 2007

IR in China – the great leap forward

Apologies to Chairman Mao for (mis)quoting him. Investor relations among Chinese companies is developing so fast, as became evident during last week when I spent time in Beijing.

My first visit to China was in the early nineties, when the Shanghai exchange was being run on the floor of an old hotel.

Fast forward to 2002, and the gleaming tower in Pudong. At that time I was asked by Xinhua PR Newswire to run an “educational seminar” for listed companies. Listing was an unusual event for Chinese companies. Access to the Chinese stock markets was limited for institutional – never mind retail – foreign investors. The massive state owned enterprises – now driving the Chinese economy – had listed perhaps 25% of their capital worth. And those companies that had an investor relations function had largely employed foreign experts.

The event 4 years ago was attended by relatively junior members of staff, sent politely to discover more about this subject. As my Chinese was non existent, interpreters helped out. I asked them in advance how they would translate the term “investor relations” – and it seemed there was no such term. So we created one.

Fast forward again to last week, and what a difference. XPRN sent out the invitations, and there was an immediate acceptance by over 100 firms. The level of English understood (and my Chinese was no better!) was impressive. The level of questioning was challenging. And disclosure practices are improving all the time. The SOE's now list upwards of 70% of their shares.

Local rules now require at least 3 years of profitable trading before a company may list on a Chinese exchange, and so there has been a significant rush to markets like AIM and, significantly, the Deutsche Boerse, where opportunities are presented.

Among the challenges faced are communicating the investment story. Many companies reaching out to international investors through European and American exchanges find it difficult to communicate the opportunities represented by the Chinese market. And winning analyst coverage is tough: many have only 2 or 3, against a sector average of 5/6.

My fellow speakers from Brunswick and Financial Dynamics – both well established in China – spoke of best practices post IPO and in dealing with the media. Creating a reputation for solid communications practices lies at the heart of the advice given.

Expect (as ever) a uniquely Chinese IR to evolve. And I hope that I will be asked again in another 5 years. It will be very interesting to see what has happened.


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