Case Benjamin

Case Benjamin

How to Develop Successful Opportunities in the Emerging Markets: Benjamin Wey

For a long time in history, investing in developing markets has been considered a risky decision. However the potential for outsized gains has encouraged investors to willingly take this risk. As an increasing number of investors seeking out growth opportunities in emerging markets, they sometimes have to face some misfortune which can turn catastrophic for the investors besides raising doubts on the viability of certain investment decisions.

 

One major market that has been considerably misunderstood due to cultural complexity is China. Investors that do not devote much time and attention to an underlying investment opportunity often fail to uncover good opportunities or avoid mistakes.

 

Although these anxieties are not entirely baseless, they can be easily proven invalid by conducting extensive inquiries on the companies of interest. While any company can easily provide false information, with careful attention and quality control, it is possible to separate the good companies from the bad ones. Sadly, in the recent times, investors tend to feel that one bad apple can control the entire perception towards investing in China.

 

Since the 1980s, the annual GDP growth of China has been in excess of 9% for more than 30 years now and the GDP has doubled every 7 years.

 

The other factors that have resulted in underestimating China related investment opportunities are the lack of understanding towards China's ever changing macro economy. Chinese "naysayers" have been predicting a downfall of the Chinese economy for more than 20 years now. On the contrary, China's GDP has increased more than three times in this same period. With the unprecedented growth of Chinese economy and growing wealth among its 1.4 billion people, there is great demand for high quality goods and services in China's domestic markets, making China a major domestic consumer market with a population 5 times that of the United States.

 

Most of the negative outlook towards China is caused by lack of true understanding of China amongst North America based institutional investors. Inability to gain in-depth understanding of China provide can often result in mispricing.

 

The following are three tools that can help one minimize the investment towards China investments.

 

1. Comparison

 

Investors interested in exploiting investment opportunities offered by China-based companies should study the drastic differences in the valuation matrix of these companies and their comparables listed on various stock exchanges in the U.S., Hong Kong and mainland China.

For example, investors may wonder why Chinese companies on average trade at mere 5 times current year price to earnings multiples in the U.S., compared to more than 50 times for their counterparts in China. Such large discrepancy highlights the necessity for global investors to better understand China's companies. There are certainly undiscovered values among U.S. listed China based companies.

 

2. Research and Due Diligence

 

Desktop research alone is far from sufficient in providing assurance for successful investing, especially in case of investing in BRIC countries. Although Brazil, Russia, India, and China are experiencing rapid economic growth, thriving consumer markets and growing foreign interest have presented opportunities in these growth oriented emerging economies.

It is vital for institutional investors to look beyond the balance sheets and income statements. One must gain a better understanding of local people and cultures.

 

3. Counsel

 

In case investors are unable to overcome all their doubts through self-conducted research, it is advisable to seek help from external sources such as dealmakers, consulting and advisory firms, and marketing experts. These professionals often provide invaluable counsel to help investors overcome language and cultural barriers.

 

Both financial institutions and individual investors can benefit greatly from the growth of the emerging markets. Gaining firsthand experience about the growth prospects of these markets by travelling to these countries is always a good idea.

 

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About the Author

About the Author

 

New York Global Group ("NYGG") is a leading Wall Street middle market advisory firm dedicated towards discovering investment opportunities in China's growth companies. Under the guidance of Mr.  Benjamin Wey, NYGG president and a co-founding partner of the firm, NYGG has more than 80 professionals between New York and Beijing. In the past 17 years, NYGG has been providing advice to China based corporate clients on strategic growth. With access to more than $500 million of investment capital, NYGG has access to a large flow of high quality deals. NYGG works extensively with investment banks and institutional investors worldwide.

 

In addition to being a bilingual Chinese American, Mr. Wey has extensive international business experience, broad contacts, and his cultural familiarity makes him an expert on China. Mr. Wey was honored with the Golden Key to the city of Suning, in China's Hebei Province, in recognition of his efforts in setting up a 120-student elementary school for the benefit of underprivileged children benefiting rural farming communities and orphans. Having arrived in the United States as a teenager with full academic scholarships, Mr. Wey went on to earn a Bachelor's degree in Management and an MBA in finance. Mr.  Benjamin Wey is also a Visiting Professor of Finance at numerous Chinese universities.

 

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