As we begin 2023, ICA asked our internal investor relations experts to define which trends will shape the markets this year and the challenges and opportunities they will face – here’s what they said.
Recession.
Many economists believe that 2023 global economic growth will be slower than last year. However, the severity and length of the recession are still debatable, with varying views, but many agree that an economic downturn is underway. What is different about the recession that may come is that many acknowledge the possibility of it happening versus past recessions that often occurred without market anticipation. Nevertheless, with many ongoing discussions about the rate-hiked-induced recession, management teams have ample time to have business continuity planning in place to weather any market slowdown.
Downsizing.
The impending recession has triggered many corporates to take preventive actions and reduce their workforce, and it has also impacted many investment banks. Over the last few months, we’ve noticed job cuts in equity and debt capital market teams across the APAC region and reports on reducing business travel expenses in local banks. As sell-side institutions minimize operating resources, this may lead to lesser means for small-cap companies. Securing invitations from the sell-side to attend their conferences and roadshows are likely to decrease as well since the limited availability are reserved for big-cap companies. Those companies with little exposure to the markets must seek alternative solutions to increase investor engagement.
Borders Reopening.
The long-awaited borders reopening has sparked investors’ interest in the Greater China market again. Although the path to reopening is bumpy for the economy at first, it certainly allows market participants to have less uncertainty. The renewed demand in the local markets, mainly seen in consumer products and traveling at first, will create a whole series of positive impacts that reverberate through other sectors by the latter part of the year.
Rise in Physical Events.
Accompanied by borders reopening is the return to physical events. After three years of virtual meetings, investors are anxious to meet their portfolio companies for a change. ICA’s vertical business – ICA Research, has begun organizing research trips in Asia for Europe-based investors. The demand for coming together in person where possible will be the preferred option for many, though hybrid events will continue to avoid the hefty travel costs.
Increase in Digital Communications.
Companies can use digital channels to heighten engagement with analysts and investors outside the earnings cycle. The investment community tends to be very busy during earnings releases and adopts a myopic view that narrowly focuses on whether the companies met the short-term financial metrics. By catching their attention outside the earnings cycle, companies have a better chance at ensuring investors apprehend your long-term business model and goals. Our growing dependence on digital platforms at Covid times is a clear indicator that news and announcement can reach the masses quickly. Companies can inform investors of the latest developments at their fingertips using various digital mediums, including company fact sheets, monthly newsletters to investors, company IR websites, and infographics on social media.
