First study of investor base in EBRD economies should help shift towards capital market financing
A new report led by the European Bank for Reconstruction and Development (EBRD) aims to promote economic growth in emerging economies with a comprehensive database of investor information that should unlock fresh sources of financing for companies in search of capital.
The EBRD commissioned the investor analytics firm Ipreo to deliver a survey of the global and institutional investor base in the EBRD regions, which span three continents and include economies ranging from Estonia to Egypt and Morocco to Mongolia.
The EBRD believes that its economies need to shift from a dependence on credit-oriented financing to a greater focus on equity capital, which is seen as a more effective driver of market and economic development.
However, many companies in these regions have concerns about moving to the capital markets in the absence of an indentified base of local and international investors and also because of low liquidity levels.The Ipreo report aims to address that problem with the provision of reliable data on the investor base in EBRD economies.
Commenting in the foreword to the report, EBRD Vice President Pierre Heilbronn said he expected the information to be useful for both local and international investors, providing “issuers with the confidence to unlock the potential of equity financing”.
“The results clearly show that international investors are very aware of the individual countries and regions within the EBRD region, with both their opportunities for growth and associated risks. Overall, transparency, access to information, corporate governance and market infrastructure, as well as political risks are some of the main concerns from investors, which clearly should be addressed by local market participants and governments. Understanding the investors’ concerns and triggers to invest gives local markets and issuers a way to position themselves and potentially attract further international capital,” says Andreas Posavac, Managing Director of Ipreo. “We are excited to have been able to work with the EBRD on this project to provide valued insight for the region.”
The report, based on a survey conducted from July to December 2017, reveals that some of the largest global investment houses – BlackRock Group, Norges Bank, APG Asset Management and Schroder Investment Management – held stakes in all economies where the EBRD invests. They were followed by The Vanguard Group, Lazard and Oppenheimer Funds which were invested in five of the EBRD’s subregions and had the majority of their allocations in the most developed countries.
Through its survey of existing investors, the Ipreo report provides a detailed assessment of investor attitudes to individual economies and regions, looking at what makes them attractive in terms of growth prospects, progress in reform and comparative valuations and yields.
But it also highlights the risks, including levels of corruption, unpredictable regulation, political volatility and the mismanagement of the reform process.
In addition, the report offers a detailed analysis of the relative ease of securities trading in EBRD economies, highlighting lack of liquidity as one key concern, but also focusing on positive triggers for investment such as higher corporate earnings outlooks and more robust economic growth forecasts.
Moroever, the report reveals how environmental, social and governance factors are playing a role in the assessment by investors of individual markets.
The full report is available here.