UBS has emerged the clear winner of AQ Research's inaugural RQ Asia 300 report, which evaluates the performance of absolute and relative recommendations on the 300 largest non-Japan Asia stocks. The Swiss bank produced the best overall average performance of 45 research houses sampled between November 1 2003 and April 30 2004.
ING Asia and Citigroup finished second and third.
The report by the independent research firm also names Deutsche Bank Asia's Stacy Shi as the region's best individual analyst because of her top scores for ratings on China Eastern and China Southern airlines. Shi is also rated highly for 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 stretch across nine countries and 17 sectors with results tabulated depending whether research houses worked on absolute or relative recommendations. The report concludes that most 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 absolute recommendations structures when judging stock prospects. These are based on individual share price performance, whereas relative recommendations are benchmark-based.
CLSA, which finished fifth overall on the research house tables, is the top ranked relative recommendation user, followed by Nomura Securities, JPMorgan and CSFB.
However, the report stresses that most brokerage houses consider absolute recommendation structures as clear, simple and unbiased. They are more transparent and fit better with investor demands.
It also concludes that those houses presently using the relative recommendation structures are considering switching to the absolute system. When one research head was asked whether he believed the sell-side was heading towards a three-tied system, a staple of the absolute recommendation system, he 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 is crowned with top rankings on stock recommendations in the Hong Kong, Malaysian and Philippine markets. AQ also garlands the bank with laurels in the conglomerates and transport sector, with ten top-three rankings in the two sectors and three by country.
The firm further praises the Swiss Bank's correct recommendations on the Hong Kong property market and picking strong twelve buys across Asia as testament to its stock selection talent.
It's nearest rival, ING Asia, picks up second place after heading the rankings in Indonesia and Taiwan. The Dutch company is also judged as having the region's best analysis in the banking and technology sector, the report's largest industries.
AQ says ING's positive calls on all major Indonesian stocks, including Bank Danamon's almost 80% share price increase heavily impacting its second place in the institutional tables. It also says it does not find this result surprising given how long the team has been together.
Overall, local houses also rank highly. In China, Kim Eng is ranked top and in Singapore DBS Vickers.
Over the entire analysis, points are deducted from the various research houses and individual analysts for making a wrong call.
In Greater China, analysts were penalised for missing the price spike on Petrochina in January. In Hong Kong, AQ Research notes 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 points 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 praises analysts' 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 for recommending a sell on a gaining Meralco saher price, as 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 published below.