Firms with global parents a better bet – study

Mon Feb 27, 2012 4:38pm GMT

LONDON Feb 27 (Reuters) – Locally listed emerging
market affiliates of multinational companies perform better than
the average for their local stock markets, as well as for
emerging markets and developed markets as a whole, a study
revealed on Monday.

Investors have in the past few years been attracted to
companies with emerging market exposure, and have usually
preferred to buy shares in the more liquid parent company,
rather than a locally listed affiliate.

The research, by Yale University and fund manager Aberdeen
Asset Management, found such subsidiaries outperformed between
June 1998 and June 2011.

Affiliates in Latin America, EMEA and Asia outpaced local
indexes by 41 percent, 134 percent and 50 percent respectively,
showing so-called “defensive” qualities during the global
financial crisis of 2008-09, the research showed.

“The two main reasons for this outperformance are improved
corporate governance and stabilising role of the parent
companies,” Martijn Cremers, Associate Professor of Finance at
Yale School of Management, said in a statement.

This gives affiliates a “clear comparative advantage over
their local competitors that should endure in the foreseeable
future”, especially at times of financial crisis, said Cremers.

Listed affiliates of Unilever in India, Indonesia
and Pakistan, in which the consumer goods maker owns stakes of
37, 85 and 75 percent respectively, showed growth of 2,229
percent between June 1998 and June 2011.

By comparison, the total return of the Unilever parent
company was 407 percent over the 13-year period, while
the affiliates’ local stock markets recorded returns of 1,157
percent, and the parent’s local stock market 147 percent.

(Reporting by Andrey Ostroukh; Editing by David Hulmes)