Press release from Business Wire India
Source: Hill & Knowlton
Thursday, May 27, 2010 04:19 PM IST (10:49 AM GMT)
Editors: General: People; Business: Advertising, PR & marketing, Banking & financial services, Business services, Media & entertainment; Technology
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Post-Meltdown India Positive about Sovereign Wealth Funds
Mumbai, Maharashtra, India, Thursday, May 27, 2010 -- (Business Wire India) -- The global downturn has spurred interest in SWF investment but concerns over transparency could obstruct their investment strategies, according to the Sovereign Brands Survey 2010, the most extensive study into the attitudes of global broad elites to sovereign wealth as a concept, the reputation of host nations and sovereign wealth funds (SWFs).
Conducted by Hill & Knowlton and Penn Schoen Berland, two of the world's pre-eminent research and communications strategy consultants, the study interviewed elites in 7 markets on their views of 19 host countries and their SWFs .
The survey revealed nearly two thirds (63%) of Indian elites are 'more favourable' towards SWFs since the global downturn, this rising to 78% in China and 80% in Brazil. Furthermore, an economic recovery is likely to accelerate interest in SWFs especially among the Asian economic giants - India (69%) and China (82%). More than half of the Indian elites surveyed consider such investments trustworthy (53%).
It is no surprise then, that SWFs have invested more than Rs 4,000 crore (about the same amount Korean steel major Pohang Iron and Steel Company or Posco will invest in three phases for a steel processing plant in Maharashtra's Raigad district) since 2003 in Indian equities, thanks to pre-2008 commodities boom and economic acceleration.
Vinod Moorthy, Vice-President, IPAN Hill & Knowlton said: "India is a developing economy. What it needs is stable capital unaffected by market movements. Sovereign wealth funds therefore stand a better chance than conventional (hedge or investment) funds, as they are not governed by investor redemptions and liquidity concerns. Perhaps this is the reason why 63% of Indian elites are more favourable towards SWFs since the recession, compared to the average of 51%. The fact that SWFs are popular in the business world is understandable. Such funds are more visible, are viewed as opportunities as well as threats, and demonstrate a consolidation of high finance with high politics."
Fears persist over SWF investment
Nonetheless, the survey revealed, host countries most interested in SWFs are also the most cautious - 97% of elites in China and 60% in India had reservations about SWFs investing in their countries.
All elites were adverse to SWFs investing in their defence sectors (45% approval overall), this view felt most strongly by those in the UK and Germany, where only 30% and 21% would approve respectively. Indian elites (73%) were keener for investment into their finance sector than the other counties surveyed, along with Brazil (84%), China (78%) and Egypt (95%).
Nearly nine out of ten (88%) of elites in India would welcome investment into the technology sector, higher than the average (86%), and only eclipsed by China (93%) and Brazil (90%). Indian Elites also favour SWF investment into healthcare (87%) and construction (86%).
Clean deals the key
When asked which factors were most important in deciding whether they would approve of a sovereign wealth fund investing in their country, overall elites ranked transparency (72%), accountability (68%) and good governance (65%) as key considerations. More elites in India (81%) and Egypt (84%) stated transparency to be the most decisive factor in approving investment from a SWF. The SWFs performance (56%), social responsibility of the fund (55%) and motivation (53%) were considered less important overall.
Country reputation determines SWF image
A country's reputation is a strong driver of the perception of its SWF (98% of all elites interviewed believing this to be somewhat / very important), and affects perceptions about that fund including its governance, transparency of financial records, performance over the last two years, and whether the SWF invests in a responsible manner, now and in the future.
. SWFs from Norway, Singapore and Hong Kong scored highest across all these categories, and Libya, Algeria, Botswana and Nigeria the lowest. Unsurprisingly, these rankings also translated into the country of origin which elites would most welcome SWF investment from.
When asked which attributes they considered to be the most important in influencing their views of a country, being politically and economically stable (78% and 74%), committed to the rule of law (69%) and adhering to international regulatory standards (67%) were considered key overall.
. Again, countries such as Norway, Singapore and Hong Kong rated highly across these factors and Libya, Algeria, Botswana and Nigeria were regarded less favourably.
Overall, softer factors such as sharing their country's values (43%) and being tolerant of people from different countries, cultures and religions (50%) were considered less important.
Joel Levy, Chief Executive Officer, Penn Schoen Berland, EMEA commented: "The economic downturn has created a real opportunity for sovereign wealth funds. SWF's images are largely determined by country reputation, and despite low familiarity and concerns over transparency, broad elites see SWFs as least likely to have contributed to recent market turmoil. This puts sovereign wealth funds in a prime position to consider their positioning and reputation in contrast to other funds and asset classes."
Certain on uncertainty
Overall, the investment activity of sovereign wealth is considered one of the least likely to have contributed to market turmoil (40% of elites thought it had) than other sources of investment such as hedge funds (65%) and investment banks (65%). However, bucking the trend against the other markets surveyed, more Indian elites felt that family wealth was a factor (52%), against the global average of 36%, and higher than any other market bar Brazil (61%).
Vinod Moorthy, Vice-President, IPAN Hill & Knowlton said: "The Sovereign Brands Survey 2010 indicates that SWFs present a great opportunity for both in-bound and out-bound investments. Such funds are all the more significant as they can play a strategic role in addressing the country's economic challenges, be it self-reliance in energy, food security, even public services.
"There have been reports of India planning a multi-billion-dollar SWF to invest in energy assets such as oil, gas and coal across the world. In my view, we have to look beyond. India is now the fourth largest holder of forex reserves; the country's foreign assets have grown fourfold, their share in GDP by about 13 percentage points. What we must look towards is acquisition of strategic developmental assets. Also, in a country like India, it is crucial for SWFs to present themselves as long-term and stable-investment solutions for the future. Transparency is also imperative for such funds to succeed and be trusted."
Notes to editors:
Methodology
Research conducted amongst 150 broad elites in each of 7 markets between 15 January and 1 February 2010. For the survey broad elites are defined as influential members of society who are university educated, generally within middle to upper management, earning in excess of £50k or local market equivalent and with an active interest in national and international affairs in the both politics and the business world. This group is commonly used within political campaigns as a proxy for the ruling class / decision makers.
Markets where research was conducted:
. UK
. US
. Egypt
. Brazil
. Germany
. China
. India
Host countries
. Norway
. Singapore
. Hong Kong
. Malaysia
. Abu Dhabi
. Dubai
. Kuwait
. Qatar
. China
. Bahrain
. Oman
. Mexico
. Russia
. Libya
. Kazakhstan
. Brunei
. Algeria
. Nigeria
. Botswana
About Hill & Knowlton
Hill & Knowlton, Inc. is a leading international communications consultancy, providing services to local, multinational and global clients. The firm is headquartered in New York, with 79 offices in 44 countries, as well as an extensive associate network. The agency is part of WPP, one of the world's largest communications services groups.
About Penn Schoen Berland
Penn Schoen Berland, a unit of the WPP Group (NASDAQ: WPPGY), is a global research-based consultancy that specializes in messaging and communications strategy for blue-chip political, corporate and entertainment clients. We have over 30 years of experience in leveraging unique insights about consumer opinion to provide clients with a competitive advantage - what we call Winning KnowledgeT. PSB executes polling and message testing services for Fortune 100 corporations and has helped elect more than 30 presidents and prime ministers around the world. More information is available at www.psbresearch.com.
To view the Sovereign Wealth Funds Survey 2010, please click on the link given below:
Sovereign Wealth Funds Survey 2010
CONTACT DETAILS
Vinod Moorthy, IPAN Hill & Knowlton, +91 (22) 40661755/+91 9892131110, vmoorthy@ipanhillandknowlton.com
Tatt Chen, Vice President, Penn Schoen Berland, Asia, +852 6406 9009, tchen@ps-b.com
KEYWORDS
PEOPLE, MARKETING, BANKING, BUSINESS SERVICES, MEDIA, TECHNOLOGY
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