A fund manager or securities broker may advise you that investments in capital markets are the most effective way to increase the value of your assets so long as the appropriate risk management is put in place. However, having said that, it is similar to gambling if you lack sufficient knowledge of the characteristics and risks pertaining to the investment products. Nowadays, there are many different kinds of products in the market such as stocks, bonds, derivatives and alternative investments. In recent years, Asian bond markets have been very active, as investors are looking for relatively high-yield investments in low interest rate environments.
In order to enhance your returns and maximize the value of your investment portfolios, it is essential to make your investment decisions in the right products at the right time. If you are seeking to invest in high-yield dividend stocks, you must equip yourself with the ability to identify those stocks. If you have invested in a company with a cash flow problem, you must pay close attention to their financial performance and be prepared for any fundraising exercise.
When compared with private companies, listed companies are generally more active in fundraising, as they may obtain funds through equity financing in addition to debt financing. Many professionals, including accountants, may find equity financing to be a better approach to fundraising compared to debt financing, especially if a company already has a high gearing ratio. For highly geared companies, the liquidity risk will inevitably increase if debt financing is further used and the equity base is not simultaneously increased to support the existing gearing ratio.
It is common for a listed company to raise funds through the process of a rights issue or an open offer to support its new projects or acquisitions, or to meet its working capital needs. In some cases, a listed company may raise credit by way of capital reduction (part of a fundraising activity) such that it can offset its accumulated losses and/or make a distribution to its shareholders. However, does this company have genuine needs for raising funds? Or are these fundraising activities just financial tricks? Have a better understanding of the rationale behind each type of fundraising activity and recognize financial gimmicks hidden behind the veil.
The workshops
To provide you with a better understanding of the areas mentioned above, the Hong Kong Institute of CPAs is now offering its members two series of workshops from September to November, namely, the Corporate Finance Series and the Investment Series. The former explores financial gimmicks and unveils the tricks behind equity fundraising and the corporate actions of Hong Kong-listed companies. Its case study workshops will touch upon the rationale behind the corporate actions such as the pros and cons of various equity fundraising activities used by listed companies in Hong Kong. Another case studies workshop will focus on capital restructuring and look at cases both locally and in Mainland China to examine the risks associated with risk and return from the perspectives of both issuers and investors. The latter series examines various topics such as event-driven investing and its application, investing in high-yield dividend stocks and Asian bonds, and identifying high risk stocks. The case studies workshops will help participants to identify, distinguish and select high-yield dividend stocks, understand the factors behind high-risk stocks, and also the risks that come with Asian bonds. Both series will be conducted in Cantonese. All three speakers have extensive experience in financial, investment and capital markets. You can find out more information about the two series and the speakers’ biographies on the Institute’s website.
To equip yourself with a better understanding and knowledge of the financial and capital market as well as their respective operations, participate in these workshops.
Alex Chow, CFA, FRM, works as a portfolio manager in a Hong Kong-based hedge fund company; M.K. Lai, PhD, CFA , Principal Consultant, Executive Training and Management Consultancy Company Limited; and Duncan Tang, Managing Director, iFinance (Asia) Limited.
