4 Ways Investor Actions on Foreign Stocks Are Changing

The move follows Hyundai’s blunder last year, overpaying by more than a factor of three for real estate in Seoul—which angered stockholders. Had the Samsung merger thwarted, it could have threatened the future structure of chaebols. But for the time being, Cheil, and the family dynasty, prevailed.

3. China halts stock sales in market turmoil:

Earlier this month, China’s crashing market led the country’s securities regulator to ban major shareholders, corporate executives and directors from selling their shares in listed companies for six months.

The ban was just one in a series of big actions as Beijing sought to control investor flight. First government-owned institutions were ordered to maintain or even increase their holdings; then the China Securities Regulatory Commission went further, ordering investors with stakes of more than 5%, including mutual funds and ETFs, to keep what they had. The action, it said, was to stabilize the market amid an “unreasonable plunge” in stock prices.

Currently China is underpinning its efforts to shore up the market with an injection of $483 billion. If the move succeeds, foreign investors who hold less than 5% stakes in Chinese stocks and are therefore still able to offload them may decide to sit tight. Even more of interest: what will be the effect of the 6-month ban on foreign funds holding large amounts of Chinese stocks? It’s far too soon to tell.

4. EU Revises Shareholder Rights Rules:

European Union lawmakers are changing shareholder rights across the region. They’re following Italy and France, where long-term shareholders are, to borrow a phrase, more equal than others.

The “one share, one vote” notion of stock ownership is getting changed across Europe in the interests of fighting against “short-termism”—companies pandering to stockholders who react to short-term results.

According to the European Parliament, member states must come up with “specific mechanisms to reward long-term shareholders” that will “foster shareholders’ long-run commitment to companies, which should in turn improve their competitiveness and sustainability.” While the European Parliament said that it should be up to individual countries to define “long term,” it added that it should not be less than two years.

Among the reward mechanisms EP members suggested are “one or more” of these: additional voting rights, tax incentives, loyalty dividends or loyalty shares. But the additional voting rights provision is currently getting the most attention, particularly since Italy and France both moved ahead with their own versions last year.

In Italy, the law allows companies to change their bylaws to grant long-term investors more than one vote per share. And it has disturbed institutional investors so much that in February they got together to protest the possibility that the Italian government would change the law further—instead of requiring a two-thirds majority vote for those bylaw changes, the proposed rule would have allowed extra voting rights to be granted by a simple majority vote until the end of 2015.

But many decided they wouldn’t take that change lying down. A letter signed by 20 investment funds, including Fidelity, UBS Global Asset Management, Schroders, Amundi and Aviva, and more than 90 others—board members and academics among them—called for the country to at the very least insist on the two-thirds majority to grant these additional investor rights.

In a press release that accompanied the letter, Luca Enriques, a professor of corporate law at the University of Oxford, said that otherwise Italy ran the risk that “international investors [would] pack up and take their capital elsewhere.”

And in France, after March of 2016, the Florange law decrees that listed French firms must grant double voting rights to investors who have held their shares for a minimum of two years—unless two thirds of company shareholders vote against the rule.