CODES OF HONOUR
The preferred route by governments and regulators to improve the landscape for investors has been to introduce or overhaul stewardship and governance codes.
Asia is one region that has seen tighter regulation introduced. Malaysia, the Philippines and Korea are just three countries to have strengthened their rules, while China is reported to be revising the corporate governance code it introduced in 2001.
Cheng says that there is a corporate governance momentum in the emerging markets, especially in Asia. “In the emerging markets they simply came to the realisation that when they provide more market access to global investors they also have to meet global investors’ expectations on corporate governance.
“That is a good dynamic that hopefully will put governance development in emerging markets on a more global stage,” he adds.
Cheng concedes that this is not a perfect solution to the problem, but it makes him optimistic. “There is a lot of work to be done, but the fact that these stewardship codes have been put in place highlights the dynamic that the emerging markets realise that you have when you are providing market access to global investors,” he adds. “So that is the start of the conversation.”
The inclusion of China in the MSCI EM index from June will bring the issue of governance into sharper focus. With this fast approaching Andrews is keen to see China’s updated stewardship code, for which there have been several delays for its release.
“With the inclusion of A-Shares into the MSCI index later this year you will get a change of the shareholder base, so we are looking to see how we can utilise that to improve transparencies and disclosers.”