Greg Kuhnert, Investec Asset Management
Development of investor relations in China is still in infancy compared to the Hong Kong market, which has a much higher percentage of institutional investor participation, Kuhnert told FSA.
However, cross-border initiatives can help to change company culture. Kuhnert, manager of the All China Equity Fund, cited a portfolio holding as an example — a Chinese electronic appliance manufacturer that he declined to name, citing compliance reasons.
“I met the firm’s representatives at a conference that one of our brokers organised. They attended with a translator. But they did not seem to be prepared as there was not even a presentation,” he said. “In fact, they were probably surprised that there was someone even interested in what they did.”
However, since the company stock has been available for trading via the Stock Connect programme that links the exchanges of Shanghai, Shenzhen, and Hong Kong, it has improved its approach to investors, he said.
The availability of the stock through the cross-border scheme has expanded the company’s foreign shareholder base, which gave management the incentive to improve the level of disclosure.
“This company today has an investor relations department with several staff who speaks English. Presentations that disclose a lot of details are always available in both Chinese and English,” he said, adding that the rating of the stock vastly improved due to a higher level of disclosure.
The appliance maker’s improvement is an exception, he said. Most companies do not have satisfactory policies for communication and disclosure. “Most of the China-listed companies are not well-prepared to talk to institutional investors.”
Retail investor risk
If institutional investors, both foreign and domestic, have found investor relations with onshore companies unsatisfactory, retail investors might face a bigger challenge.
China’s stock market is dominated by retail investors, who altogether make up about 80 percent of turnover. Retail buyers generally lack information about listed company operations and of course do not have the opportunity to speak to the management directly.
As a result, China’s retail investors engage in short-term trading without knowing company fundamentals, he added.
This retail-driven risk has also been a concern of Pictet’s David Gaud, who said some rumours, which can be from Weibo or some social media platforms, could create some panic and affect the onshore investment sentiment massively, as reported earlier.
Kuhnert is a portfolio manager of Investec All China Equity Fund. The fund ranked as the second best performing fund in 2017 among all equity funds registered for sale in Hong Kong, delivering 69.01% return in US dollar terms.
Performance of the All China Equity Fund since inception
