Profiles

Much can get lost in translation

(Reuters)
Updated: 2006-05-26 14:17

Bank of China, whose US$9.7 billion Hong Kong IPO drew heavy demand from investors, may owe a small part of its success to a less-obvious source -- its chairman's strong command of English.

Xiao Gang, chairman of Bank of China [file photo]

Several fund managers who attended Bank of China's road show which kicked off in Hong Kong earlier this month said they liked the fact that Chairman Xiao Gang was able to field questions in English.

"I am impressed by his fluent English," said a Hong Kong-based investor, who manages a medium-sized mutual fund, adding he would subscribe to the initial public offering.

Xiao stands out as he is still a relative rarity among executives at state-run Chinese firms.

Increasingly, mainland executives manage to make powerpoint presentations or deliver prepared speeches in English, but few have dared to answer questions in English directly -- to the detriment of investor perceptions.

Well-comported, fluent English-speaking executives help foster an impression of openness among foreign investors. But more traditional mainland executives lacking communication skills can leave the impression that disclosure is not a priority.

"It is hard for serious fund managers to have any confidence in a stock unless they can communicate directly with the management," said Vincent Chan, who heads up China research at Credit Suisse.

"Presentation does make a difference, at least in the short term," Chan added.

VALUATION GAP

Companies such as CNOOC, Ping An Insurance, and China Mobile are seen as good communicators, analysts and public relations managers said.

Among large overseas traded companies, Chinese state refiner Sinopec Corp. and China Life Insurance are said to have room for further improvement.

"It is hard to quantify language discounts," said Sunny Li, chief investment officer of Pinpoint Asset Management, a Shanghai-based hedge fund. "But for sure, it exists."

For example, PetroChina's share valuations have long lagged those of its more nimble rival CNOOC, whose executives are smooth-talking overseas returnees. PetroChina's executives preferred to shy away from the limelight.

But after attempts to improve their image, PetroChina is now trading at 9.8 times its forward earnings against CNOOC's 8.5.

Mao Zefeng, PetroChina's head of investor relations, said that the top Asian oil firm is more experienced at dealing with investors, and that might have helped narrow the discount.

PetroChina tries to answer all of the investor emails it gets. Its chief financial officer is also more confident in communicating in English with foreign investors.

"Better communication has helped to make a difference," Mao said. "Investors now see us as a low-key company with results-driven investor relations."

Weak communication is often coupled with poor disclosure.

Mandarin is the native tongue of Lei Wang, who manages Asian equities for U.S. mutual fund group Thornburg Investment. But even he said that many times, Chinese executives cannot answer his questions directly to the point.

"They talk about how good they are but cannot back it up with numbers," said Wang, a mainland Chinese who went to business school in New York. "Every Chinese company could use an overseas-educated MBA to talk to foreign investors."