Our survey of global investors and analysts reveals that, while appetite to invest in Asian technology companies is high, investor trust is low
Chinese and other Asian companies’ ability to tap capital markets depends on one critical non-quantitative factor: TRUST. If you have it, you have a "license to grow" and can achieve better valuations and liquidity, a lower cost of capital, more credibility and improved resilience. If you lack it, you can spend all your time battling the naysayers and doubters, fighting to get noticed for the right reasons.
In the last 20 years, Chinese and Asian tech stocks have had a rocky romance with Wall Street and stock markets in general. Exuberance has marked many IPOs, but the highs have been counter-balanced by lows including accounting and governance scandals, declining valuations or persistent discounts, and privatizations. Today, there is robust global demand for tech IPOs, but much of the money investing in the sector in Asia is blindly following the huge market opportunity and momentum, particularly in China, rather than taking the time to understand individual companies. In short: demand is high, but confidence is low.
Yet, a new wave of big and arguably more sophisticated Asian technology companies is coming to the market. The stakes will be higher, and the competition will get fiercer, as each company tries to overcome the trust deficit for itself in order to attract and keep high quality investors.
Probing the reasons for the trust deficit in Asian tech, in order to offer strategic advice, is the reason why Brunswick carried out an online survey in late 2016 of over sixty global institutional investors and analysts to gauge market perceptions of listed and unlisted players. Our identification of precise gaps in trust and misunderstanding confirm what we know from experience to be true, but offer more data, depth and clear insights that point to the way forward.