Asian firms rated high on governance

HONG KONG: Asian firms with better corporate governance practices outperformed domestic equity market benchmarks by an average of 35 percentage points in the past five years, a report by CLSA Emerging Markets said.






"Over short periods, the outperformance of high-scoring stocks is tenous," said the report, which was authored together with Asian Corporate Governance Association (ACGA). "But over the past five years, stocks in the top 25 percent of the CG (corporate governance) survey outperformed their markets by an average of 35 percentage points (ppts), while those in the bottom 25 percent underperformed by 25 ppts," it added.

The report, which ranked 380 companies in 10 Asian economies, said among large regional capitalised stocks -- HSBC Holdings, Infosys Technologies, TSMC, KT Corp, BAT Malaysia, Public Bank, Singapore Press Holdings, ST Engineering and Standard Chartered were those having high corporate governance scores.

CLSA said Singapore, Hong Kong and India are seen as offering investors the best corporate governance environment, whereas Indonesia, the Philippines and China are the riskiest. "For their part, Korea and Malaysia have seen the highest improvement in our macro CG scores since we began these in 2001," the CLSA report said.

The report said Asian companies were improving their record on corporate governance but the depth of their commitment is still not yet clear. "In all markets however, cases abound of egregious transgressions. Still investing in companies with good CG gives investors some safety in avoiding the worst blowups," the report said.

Amar Gill, CLSA's head of Hong Kong research, said there was improvement in regional regulatory and enforcement standards, but avenues for redress by minority shareholders remain lacking. Analysts say Asia has come a way since its 1997/98 regional financial crisis and put in place stricter rules and many companies enacted codes of best practices to lure investors.

But opaque family-controlled business structures, off-balance-sheet liabilities and lack of minority shareholder rights are issues still dominating most Asian markets.

© Reuters