In finance, perceptions are at least as significant as performance. In my formative analyst years, I encountered an exceptional spokesperson at a fledgling Indian financial institution. The person ensured that everyone involved saw the corporate narrative that he envisioned and, in the process, clarified the company’s value proposition, boosting its valuation and reducing its cost of capital.
Companies that master storytelling and have it propagated in the right circles often command higher valuations. While North Asian hardware manufacturers like TSMC, Samsung, and Hynix are riding the AI wave with impressive revenue growth, they’ stand undervalued compared to their Western peers. This is due to a lack of vocal supporters – the “fan clubs” that shape market narratives.
In the U.S., companies like NVIDIA and Tesla benefit from enthusiastic advocates in media and research. The most voluble lead investor interest and confidence, resulting in higher valuations and lower volatility. Korean and Taiwanese giants lack influential cheerleaders and fall prey to far less confident domestic liquidity, as witnessed during the “Yen burp” of this week.
The carry trade-led reversals saw the worst correlated moves in Korea and Taiwan, which do not have deep domestic investor bases like India or China. The largest tech companies move without anchors because they are a large part of domestic liquidity pools that find little substantial support from local economic or monetary policymakers through statements or actions in times of external turmoil.
The lack of communication damages are galling when hardware innovation is turning visibly extraordinary. While investors dissect every detail of NVIDIA’s latest chip or Elon Musk’s AI predictions, Asian companies rarely offer their narratives on GenAI potential or ROI. Most managements like to stay indifferent to share volatility, binning it as either unimportant or uncontrollable while paying largely only lip service to value unlocking. This is an error from a corporate management viewpoint, too, in the days of heavy capex.
No corporate senior management should be slaves to ticker moves, but none can be completely removed from valuation ranges and volatility. Engaging shareholders, with an attendant impact on the cost of capital, requires different skills compared to, let’s say, engaging bankers while taking loans. Suffice to say, North Asian companies need to build the desire to learn from the best in markets with better valuation ranges.
An example to illustrate this point. Figure’s impressive demo overnight should spark discussions about benefits for other companies in the space, like Hyundai-owned Boston Dynamics. Yet, the listed entity that is unable to account for the huge valuations its Indian subsidiary is likely to have another valuation-lifting event go unnoticed. Value Unlocking often requires more than mere actions; they also need words!
