HONG KONG: Asia-based institutional investors trust pressure groups and governments more than big business -- a sign of fund managers' scepticism towards the companies they invest in, according to a report to be released recently.
A survey of 131 fund managers in 10 Asian countries suggests that eight years after foreign investor confidence was rocked by the region's financial crisis, local companies are still fighting to win back their trust.
The lack of trust between institutional investors and Asian companies could explain why many of the region's equity markets trade at a discount to their Western counterparts.
However, the negative perception of business has not stopped foreign investors from buying heavily into Asian equities, with most of the region's markets boosted by large capital inflows from overseas over the past two years.
Investors' mistrust of business is reinforced by companies' perception of themselves. According to the survey, fewer than two out of 10 company executives trust business to "do what is right".
The study, commissioned by the US public relations firm Edelman, found only 23 per cent of Asia-based fund managers believe the region's companies could be trusted to do what is right.
Non-governmental organisations -- charities and pressure groups such as Amnesty International and Greenpeace -- were the most trusted bodies.
However, the NGOs' good performance, and business's poor results, could indicate fund managers' growing concerns over ethical investing, environmental issues and workers' rights in Asia.
Governments, which in Asia retain a bigger influence over the economy and business than in the Western world, were the second most trusted institution, with the media ranked last.
"We believe that the disparity in trust between government and business sends a strong message to business that stakeholdirs expect much more than the delivery of products and services," said Alan VanderMolen, Edelman Asia Pacific president.
Foreign investors privately complain about corporate governance and lack of transparency among the Asian companies they invest in.
A related survey of more than 900 Asian opinion leaders -- government officials, companies' executives and employees, investors, journalists and consumers-found that governments were the most trusted institution with a third of the votes.
By contrast, business received only 18 per cent of respondents' preferences.
Under syndication arrangement with FE