Updated: May 20, 2022
My note: The observation the EM affiliates outperform was that Hugh Young and his team at Aberdeen had been aware of for several years. I picked up the lead, contacted Martijn, and provided him with the data he needed to turn Aberdeen's observation into a statistically significant finding.
By Reuters staff
LONDON (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 HLL.NS, 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 ULVR.L 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