T hree years ago, Eva Chan was the chief financial officer of Beijing Capital Land, a Hong Kong-listed mainland property company whose largest shareholder is the Beijing municipal government. So when the CPA told her friends

she was leaving the company to become head of inves-tor relations at C.C. Land Holdings Ltd., a Sichuan-based mainland developer, in 2007, they were surprised.

Investor relations professionals act as a conduit between companiesand stakeholders. The growing field is a new career option foraccountants, reports Liana Cafolla

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“When I changed my title from CFO to IRO (investor relations officer), some of my peers and classmates said, ‘Eva, are you downgrading yourself?’” she recalls.

Chan herself was a lot more blasé with her career choice. She explains that towards the end of her five years with Beijing Capital Land, where she also served as company secretary, she was spending more than half of her time meeting and dealing with investors. So her move to C.C. Land was a logical switch.

As more Chinese companies seek to list in Hong Kong

26 August 2010

Investor relations

Bridging the gapand overseas, the role of investor relations is gaining prominence and provides a new career opportunity for accountants who would like to spend more time interact-ing with a broad mix of company stakeholders.

Unlike the U.S. and Europe, where investor relations has been well established for decades, the profession is relatively new to Hong Kong, and Chan says she is among the field’s pioneers here. The job, the CPA insists, is not as easy as it may sound: To succeed, one needs to possess a wide range of skills integrating finance, communica-tion, marketing, fund management and compliance to ensure an effective dialogue between the company and its stakeholders.

“I’m like a bridge between the investors and the com-pany. I pass information and concerns both ways,” she says, adding that her accounting background has been a big plus in facilitating her work.

“It definitely helps when I talk to analysts. They also give me some respect because they know my background – I’m not talking from nowhere. I’m also very familiar with the listing rules, because as a good IRO, you need to know what you can say and what you cannot say. Otherwise, you will bring trouble to your company and yourself, and maybe also to the investment analysts.”

More demanding investorsThe role of investor relations professionals has grown as bigger companies and more institutional investors are involved in the Hong Kong stock market, Chan says.

“This change began in 2005 when the big Chinese com-panies started listing in Hong Kong. About 10 years ago, if your company’s market capitalization was HK$7 billion, you were among the top 50 companies in Hong Kong. But now, to be in the top 50, you need to have HK$60 billion.”

Bigger funding requirements necessitate, and attract, more institutional investors from around the world, she says. “Ten years ago, only 38 percent of the traders on the Hong Kong stock market were institutional investors. Now it is close to 60 percent.”

As the local stock market matures and because of greater participation from big-money players, investors have now become more demanding and increasingly in-sist on face-to-face meetings with top management.

Such meetings were previously held by company CFOs, but that’s no longer possible given the growing number of investors, so a dedicated professional is re-

quired, Chan explains – a decade ago, CFOs typically met a few investors a month, now it’s often one or two a day.

Global fund raising also means companies need an investor relations officer when they go on roadshows in New York, London or other financial centres.

NiQ Lai, City Telecom’s CFO who oversees investor en-gagement in the company, credits good investor relations for allowing his company to secure important funding.

“As the investor relations industry matures, we need to move from a traditional, reactive approach, whereby junior staffers answer questions from investors, to a pro-active one,” he says. “We need to proactively seek or at-tract the right long-term investor base, and then engage them so that they fully understand our industry and the strategic role we play. Investor engagement is important because it can give a company access to capital when it is needed most.

“We would not be here today without global investors. Our competitors have the backing of large conglomerates, we have the backing of the global capital market,” Lai says. (See a full interview with Lai on pages 32-36)

Last year, City Telecom retained investor relations consultancy Elite IR to help with its roadshow presenta-tions to institutional investors and equity analysts in the U.S. and Asia.

Strengthening investor relationsSensing a need to boost both the quantity and quality of investor relations professionals here, Chan, together with a group of professionals in the field, set up the Hong Kong Investor Relations Association in late 2008. She is now its chairwoman.

“When overseas investors deal with their local IR people, those IR officers are very professional and com-petent. But when foreign investors meet the IR people in Hong Kong, they’re a little bit disappointed. Some of the IR people here are not well prepared when they go to meetings with investors.

“This is why we came up with the idea to set up the association, to make the industry more professional and raise it to the international standard,” she says.

Vicky Yu, senior manager of investor relations, corpo-rate development at Global Bio-chem Technology Group Company Ltd., which manufactures and sells corn-based products and biochemicals, agrees Hong Kong’s investor relations professionals have some catching up to do.

August 2010 27

Yu set out to become an accountant but switched to corporate finance during her undergraduate studies. She then worked as a consultant, helping prepare the Hong Kong listing of Global Bio-chem in 2001. The company later offered her a job heading its investor relations.

“Initially a lot of people thought this was a short-term job and that once the company was listed, that would be enough. But now they realize this is an ongoing role. Investors are starting to expect it.

“You have to know everything about your company – the market movements, the sentiments, the feedback from others, what your competitors are doing – so it’s a lot of research work,” she says, adding that she now has two people working under her.

Adding to the stake is that more than 90 percent of institutional investors she deals with are highly trained financial or accounting professionals.

Ensuring that these investor expectations are met is a challenge that long-time investor relations professional and part-time lecturer Lynge Blak is eagerly embracing.

Investor relations in the West is a strategic management function that operates under strict regulatory require-ments, he says. But in Asia, company management are still unsure if they should treat investor relations as a cost or as part of the value creation process, and how much they should invest in developing the function, which poses challenges for the IR professionals here, he says.

Blak, who started working in investor relations in London in the mid-1980s during a period of extensive privatization in the U.K., and has worked in Hong Kong, the mainland and other emerging Asian markets, says investor relations has many crucial dimensions.

“Over the years, I have never compromised with the concept of strategic investor relations,” he says. “My phi-

Investor relations

28 August 2010

losophy is that... our clients should aim to establish an investor relations programme that creates value to the company and its shareholders.”

Blak says investor relations professionals need to pro-vide timely and accurate information about a company’s finances to help investors make qualified investment decisions. He predicts that the growing number of over-seas investors will demand more information from Hong Kong and Chinese companies, which will drive changes in local management attitudes towards transparency.

Operating in ChinaFor now, the level of transparency widely expected by foreign investors remains a tricky area for some Chinese companies, as the central government continues to main-tain a tight grip on a wide array of industries.

Investor relations practitioners in the Chinese prop-erty market, like Chan of C.C. Land, require additional skills such as a grasp of Chinese macroeconomic policies and a keen political awareness for interpreting the na-tion’s often oblique legal terminology.

“In China, the property business is very much policy-related. For example, if there’s any new kind of policy coming out from the government like tightening mea-sures, we have to update the analysts. How to interpret the policies and how the policies are to be executed – this is the most important.

“For example, how to define ‘second home’? There are a lot of different interpretations. Even if you have a second home, if it has no mortgage, in some cities, it will not be considered a second home,” she says.

The biggest challenge is handling queries involving price-sensitive information, Chan says. “How to define price-sensitive information? This is based on your expe-rience and also how much you know about the market. There are some questions I can’t answer. In those cases, I give a standard answer,” she says.

Agnes Chan, who is in charge of investor relations at state-owned China Construction Bank and vice-chair-woman of the Hong Kong Investor Relations Association, faces the same challenge. Because the central govern-ment dictates major banking policies, Chan says she often has to revert to her Beijing office for approval before speaking with investors.

Chan, who previously worked as an investor relations manager for PCI Insurance, a private Hong Kong company, says she enjoyed greater autonomy in her old job, but analyzing the insurance sector required a higher level of expertise. “It was much more difficult than dealing with banks, where there tends to be a lot of experts,” she says.

The ability to interpret the data and clearly explain to investors is vital, Chan says. “A CFO will give you the facts and the figures, but you need someone else to explain it, and to tell them where we are going from there,” she says.

For example, Chan has to differentiate the advantages of her bank from those of other state-owned banks. “All banks previously had specialized sectors. Potential in-vestors look at differences and dividend payout. I have to explain why we are better; for example, we only lend to quality companies, and our risk management is better than that of competitors.”

More than financial knowledgeBut a financial background alone is not enough, says C.C. Land’s Chan. “To be a good investor relations officer, you need to have a different type of skill set, like how to com-municate effectively with investors, how to identify your investor... and how to effectively plan for your roadshows to make sure you see the right investors,” she says.

Accountants also need to adapt to give investors what they want. “Because of their professional training, accountants want to make sure of all the figures. They apply the same method when they see the investors. But this is not what the investors want – they just want ball-park figures,” she says.

Yu of Global Bio-chem spends 30 to 35 percent of her time meeting with investors around the world, and some-times works round-the-clock across different time zones. She says the job’s challenges include dealing with irate investors, managing unrealistic expectations and time-management skills.

“ To be a good investor relations officer, you need to have a different type of skill set, like how to communicate effectively with investors, how to identify your investor... and how to effectively plan for your roadshows to make sure you see the right investors.”

August 2010 29

“ We find that nearly all new IPO companies hire IROs. If not, the sponsor or investment bank will recommend some potential candi-dates to the company because they know a good IRO is the key to a successful IPO.”

“One investor, who knew the company well, just sat there and said, ‘I really don’t like your management, they really make the wrong decisions,’” she says.

There is constant pressure to stay cool and think fast. “One other difficulty is everybody wants to know the fu-ture, but you can’t predict it. But still you have to explain how come I’m positive or negative about this and that. You only have 50 minutes for each meeting, that’s why very strong analytical skills are needed,” she says.

Accountants in demandWhile some companies in Hong Kong continue to out-source investor relations services, more listed companies, ranging from pharmaceuticals, conglomerates to technol-ogy enterprises, are starting to hire their own staff, says Eunice Siu, manager at recruitment consultancy Michael Page. She currently has several clients seeking investor relations professionals.

“We see a very limited pool of candidates in general,” she says, adding that many candidates work in public rela-tions and are trying to transform themselves into investor relations professionals. “In the finance world, we often see CFOs wearing two hats and playing the IR role. How-ever, a good IR candidate really helps the company build relationships in the investment community.”

Salary levels for senior IR professionals are equivalent to those of finance directors or financial controllers at between HK$60,000 to HK$100,000 or more per month, she adds.

C.C. Land’s Chan says out of 1,100 listed companies in Hong Kong, about 250 to 300 now have an investor rela-tions officer. “We find that nearly all new IPO companies hire IROs,” she says. “If not, the sponsor or investment bank will recommend some potential candidates to the company because they know a good IRO is the key to a successful IPO.”

Chan herself gets frequent calls from head-hunters looking for IR professionals on behalf of listed companies, most of which have less than HK$10 billion market capi-talization. “They’re looking for really senior IR people. But it’s hard to find [them] in the market.”

An accounting background is definitely an asset, Chan says. “You need to do a lot of financial analysis on the com-pany. Literally, sometimes, investors give you a spread-sheet and ask you to fill in all the numbers. At the same time, you need to know the accounting standards and the individual figures in the financial report. For example, I know how to prepare a financial statement and I know where to look,” she says.

Siu agrees that more than half of her clients would prefer candidates who are trained accountants.

“They often grow into IR positions from their existing role when they reach a certain level, as not too many com-panies are able to support both the financial controller and investor relations functions,” she says.

A booming fieldBlak predicts demand for investor relations profession-als in Hong Kong will explode over the next five years, mirroring a global trend. He cites the fact that the Global Investor Relations Network, an international organiza-tion that links investor relations societies worldwide, grew from four members in 1990 to 32 now, including six additions from Asia last year alone.

“Hong Kong will become a completely different market environment with explicit requirements from the inter-national fund management market for more information before placing their funds in the local economy,” he says.

Blak believes training more IR professionals is the best way to prepare for the upsurge. He lectures at the Hong Kong Polytechnic University, where the Hong Kong Investor Relations Association helped set up an investor relations programme two years ago.

The part-time, 192-hour course targets those already working in the field, corporate communications and fi-nancial public relations professionals, as well as directors and senior executives of listed companies or companies seeking to list.

Blak says the trick for practitioners lies in how to con-vince listed companies’ management that an effective investor relations function can help minimize irrational swings in their stock value.

“I see the IR function taking responsibility for locating the right ‘fit’ between a company’s direction and its share-holder base, which could lead to an optimal valuation of the company, and a lower cost of capital and lower stock price volatility,” he says.

Investor relations

30 August 2010