Issuer-sponsored research is the New Black
Issuer-sponsored equity research in Australia -
Why ASX’s recent Guidance Note 8 amendment is a big step forward
Pitt Street Research’s bread and butter is issuer-sponsored research of companies that are publicly traded on the Australian Securities Exchange (ASX). We are big believers in the power of issuer sponsorship to enlarge the pool of quality, widely accessible research on ASX-listed companies, and thereby contribute to the overall efficiency of the Australian equity market. As such, we are very encouraged by the May 2018 publication by the ASX of an amendment to its Guidance Note 8, which expands the ASX’s ‘Continuous Disclosure’ rules to cover the way in which listed entities are allowed to use equity research that has been written about them.
MiFID II is a game-changer for equities research
Stuart and Marc discuss the effects of MiFID II on the Australian listed companies landscape with Boardroom Media.
The Rise of the New Analysts
It’s been a feature of Australia’s equity market for some years now: Business is tough for the brokers and investment banks, and there are layoffs. The cuts happen across the board, but inevitably the axe falls heaviest on the research team. We estimate that the number of analysts working for participant organisations of the Australian Securities Exchange has shrunk by one-third since 2010, and for those still working in the industry, average compensation has probably dropped by a quarter.
There is, however, one interesting trend that shows signs of going the other way. We argue that analysts in Australia will in the future show up in increasing numbers at ‘independent’ firms that just do research and are not affiliated with any broker.
The science behind independent research: Issuer-sponsored equities research pays off
"....paid-for reports have information content for investors based on 2-day abnormal returns. After the initiation of coverage, companies experience an increase in institutional ownership, sell-side analyst following, and liquidity".
Prof. Dr. Marcus Kirk, University of Florida, 2010