The Swiss bank, UBS has emerged as the bona fide winner in AQ Research’s inaugural RQ Asia 300 report . According to the analysis, which evaluates the performance of absolute and relative recommendations on the 300 largest non-Japan Asia stocks from 45 research firms between November 1 2003 and April 30 2004, UBS produced the best overall average performance among research houses, followed by ING Asia and Citigroup.
The analysis also judged Deutsche Bank Asia’s Stacy Shi as the region’s best individual analyst, who achieved top scores on for her ratings on China Eastern and China Southern airlines. Shi also rated highly on her analysis of Travelsky Technology, which she correctly repositioned from hold to sell during the determined period. UBS’s utilities analyst, Alice Hui, was voted second due to her bullish outlook on mainland power stocks, Beijing Datang and Huaneng Power.
AQ Research’s findings stretched across nine regional countries and 17 sectors with results tabulated depending on whether research houses worked on absolute or relative recommendations. The report suggests that research houses and individual analysts captured the markets peaking in January and February of 2004.
According to AQ research’s analysis, six of the top ten research firms use the absolute recommendations structures when judging stock prospects. The report stresses that brokerage houses considered the absolute recommendation structures as clear, simple and unbiased, more transparent, adherent to growing regulation in the face of accounting and financial scandals and in accordance with investor demands for hedge funds and absolute returns.
CLSA, who finished fifth overall on the research house tables, were the top ranked relative recommendation user, follower by the other relative structure based houses, Nomura Securities, JPMorgan and CSFB.
Absolute recommendations are based around the rise of a particular share price, whereas relative recommendations are benchmark-based.
The report suggested that those presently using the relative recommendation structure when determining buy/hold/sell options were considering switching to the absolute system. When asked about whether he believed the sell-side was heading towards a three-tied system, a staple of the absolute recommendation system, one research head with an international house anonymously quipped that, “Yes- the writing is on the wall…many of the analysts want to use this system.”
UBS’s victory in the overall stakes was compounded with top rankings on stock recommendations in the Hong Kong, Malaysian and Philippine markets. AQ Research’s analysis also awarded the bank with laurels in the conglomerates and transports sector, with ten top-three rankings in sectors and three by country.
The independent research analysis firm praised the Swiss Bank’s correct recommendations on the Hong Kong property market and picking strong twelve buys across Asia as testament its stock selection talent.
It’s nearest rival, ING Asia, picked up second place in the research house stakes after heading the rankings in Indonesia and Taiwan. The Dutch company was also judged as having the regions best analysis in the banking and technology sector, the report’s largest industries.
ING’s positive calls on all major Indonesian stocks, including Bank Danomon’s almost 80% share price increase was seen by AQ research as heavily impacting its second place in the institutional tables.
Over the entire analysis, points were deducted from the various research houses and individual analysts for making a wrong call.
In Greater China, analysts were penalised was missing the price spike on Petrochina in January and in Hong Kong, AQ Research noted that analysts incorrectly rated rebounding media stocks negatively. Analysts were also wrongly positioned in Taiwan ahead of Macronix’s rally and the drop of Compal and Quanta in absolute and relative terms.
The report pointed out that the stock prices of Korean chemical, telco and industrials failed to meet expectations and only one firm picked the plunge in Singapore’s national carrier, SIA. Across the border in Malaysia, the report praised analyst’s correct recommendations on the underperforming Petronas share price, also stating that most analysts’ recommendations were fairly spot-on in the flat Malaysian market.
In the Philippines, research firms and individual analysts lost points by recommending a sell on the gaining Meralco prices and did those who moved positively on Bank Central Asia after January in Indonesia. Buy calls on Thai media and property companies were also seen to be negative recommendations.
AQ research is an independent research firm that been providing quantative analysis of research houses and individual analyst’s recommendations and forecasts since 1998. In 2003, the firm began publishing its RQ series of reports, including its recently published RQ Euro 300 analysis.
The results of the RQ Asia 300 survey are found below.
