Best companies in Asia 2006: Managing change, delivering growth
Most investors want to invest in the best companies; Asia is no exception to this. The region’s best-managed companies are a diverse bunch but have some crucial characteristics in common. Chris Leahy reports.
THE RISE OF Asia’s economies thus far has been principally a story of trade and manufacturing, with services becoming the key growth driver in the region’s more developed markets. Start a small import-export business or a factory making consumer goods in a country where the economic tide is rising rapidly and it is not too difficult to make money and grow. As savings pools and foreign exchange reserves expand, increased liquidity inflates asset prices, providing easy money for real estate speculators and stock traders.
Defining what constitutes a well-managed company in Asia, therefore, is not altogether straightforward: it depends how you measure it. With many companies in the region profiting from the asset inflation story, sound management practices and attention to protecting the interests of all shareholders through strong corporate governance principles often take a back seat. Research undertaken over the past three years by CLSA and the Asian Corporate Governance Association (ACGA) demonstrates a clear link between investors’ appetite for risk and their interest in how well a company is being managed.
“The performance of stocks and markets with high levels of corporate governance negatively correlates with risk appetite,” writes Amar Gill of CLSA in CG Watch 2005.