By Rashmi Kumar
Analysts have really been put to the test in 2019: they have had to factor in bouts of volatility from the US-China trade war, a U-turn by the US Federal Reserve, the threat of a slowdown in global growth and worries about the health of the financial system in China and India, among other things.
So investors have paid even closer attention to analysts’ recommendations to see who provides the most insightful opinions and makes them money: and in these difficult times, HSBC won more accolades than any other firm.
That is, at least, according to Asiamoney’s 30th brokers poll, which received 5,570 valid individual responses from 2,558 different institutions, including close to 350 hedge funds.
The poll invited chief investment officers, fund managers and investment analysts to take part.
HSBC had a stellar year. It swept the board in Asiamoney’s regional awards – named the best for overall combined regional research and sales in Asia ex-Australia, ex-China A&B and ex-Japan, as well as the best for regional research and sales separately. Its analysts were also in hot demand, with about half of the winning analysts in the poll coming from HSBC.
The victory was no easy feat, but rather it was thanks to years of effort behind the scenes in staffing the bank with the right people and making sure analysts focused on those industries that mattered to HSBC’s clients.
“HSBC has a strong commitment to its equities franchise, with investments across the platform in sales, trading, research, corporate access and capital markets,” says Michael Chandler, head of Asia-Pacific equity sales.
“It is exciting to be part of a firm that is not only committed to its equities business, but has unique resources across asset classes and strong local presence in which our sales teams can leverage to provide differentiated insights to clients,” he adds. “We have a strong culture of teamwork and collaboration, and we want to be the go-to firm to help clients navigate across established and emerging markets in Asia and beyond.”
Over the last three years, HSBC ramped up its equities business with a series of important appointments and job moves. In early 2017, it appointed Hossein Zaimi to be the Hong Kong-based global head of equities, promoting him from his previous job as regional head of trading for global markets, Asia Pacific.
Chandler came on board as head of equity sales for Asia Pacific a few months later, in the middle of 2017, moving to HSBC after 17 years at Goldman Sachs.
Since then, HSBC’s regional equities platform has been dramatically revamped with several key appointments. Isabella Kwok was hired as head of equity sales for Hong Kong in the middle of 2018, from Deutsche Bank, and Echo Wu came on board as a director for Asia Pacific equity sales in May 2018 from China Merchants Bank.
Michael Parry joined from Goldman, also as a director focused on Asian equity sales, in December 2017. Liu Kang, who was previously at Beijing Gao Hua Securities, and Jimmy He from CICC moved to HSBC’s equity sales team at the end of 2017. Both Liu and He focus on the mainland China market.
On top of that, HSBC hired Edman Wong from Citi and Adam Wang from CICC in 2018. In Singapore, Vivek Gandhi moved from CLSA to join HSBC as a director for equity sales in August 2018.
Former Goldman banker Rob Crane joined HSBC in September 2017 to be its London-based global head of equities execution, Ed Duggan jumped ship from JPMorgan in November 2018 as HSBC’s head of sales trading and execution for Asia Pacific, and Eliot Camplisson became HSBC’s head of equities research, based in Hong Kong, on September 2019, joining from Goldman.
“We have a diverse and stable team now,” Kwok tells Asiamoney. “The investments we’ve made have been positively received by clients and impacted our platform positively.”
That certainly seems to be the case. HSBC’s victories in the 2019 brokers poll were unequivocal, with a relatively chunky margin between the winner and CLSA in second place across the three key regional categories: combined research and sales, and the two separate businesses.
Questions surrounding ESG and implementation in investment process are being raised by almost every investor- Isabella Kwok
HSBC came top in the Hong Kong local market for overall research, beating CICC and CLSA by a big number. CLSA, which is owned by China’s Citic Securities, was the 2018 and 2017 regional winner across combined sales and research, as well as individually.
HSBC’s analysts and economists have taken home some big wins too. Hongbin Qu was voted best economist for 2019, Gary Lam best analyst for banks, Michelle Kwok best analyst for real estate and Frank He for technology hardware and equipment analysis.
Of the 21 individual people awards on a regional Asia ex-Japan level, 11 work at HSBC. One other analyst has left the bank but was with HSBC at the time the poll was conducted.
There are some areas where HSBC’s absence is stark, however.
In overall combined research and sales for Australia, the top three spots are taken by Macquarie, CLSA and UBS respectively, while for China A&B shares overall combined research and sales, HSBC doesn’t make it into the top three positions, which are instead taken by CICC, CLSA and Haitong International.
CICC keeps the top ranking for best local brokerage in Hong Kong with 22.5% of the votes versus HSBC’s 18%, while HSBC also fails to unseat CICC as the best for overall sales services in the SAR.
In the South Korean market, HSBC ranked second for overall research and second for overall sales services. In Singapore, it was top of the list for overall research, pipping DBS Bank and CLSA, which held the second and third spots respectively.
HSBC was also among the top three in Taiwan, traditionally a foothold of the local houses. HSBC was second for research and third for sales services.
Senior analysts at HSBC tell Asiamoney that navigating markets this year was not easy.
One of the main difficulties was the constant back and forth around trade tariffs between the US and China. Much of 2019 was dominated by headlines around their relationship. A phase-one trade deal was close to being wrapped up in November. But that was thrown into question in early December by US president Donald Trump, who said he was in no rush to sign a tariff truce.
Despite the noise, however, international investor interest in Chinese equities did not waver much. Take flows on the Hong Kong-Shanghai Stock Connect, for example. The connect scheme, which allows foreign and mainland Chinese investors to trade securities in each other’s markets, was launched in November 2014, followed by a link between Hong Kong and Shenzhen two years later.
At the end of October 2019, the total cumulative northbound trading turnover on the Stock Connect was Rmb17.41 trillion ($2.47 trillion), bringing net capital inflows of Rmb860 billion into the China A-share market.
Hong Kong and international investors held Rmb1.22 trillion of shares listed in Shenzhen and Shanghai exchanges at the end of October 2019, compared with a meagre Rmb86.5 billion at the end of 2014, according to data on the Hong Kong Stock Exchange website.
Kwok says: “2019 started strongly as investors thought the trade war would not materialize to the extent it has.
“The USD/CNY traded back to 6.7 in the first quarter, but as trade tensions accelerated sharply from the second quarter and created uncertainties, investor confidence and sentiment wavered.
“However, interest in Chinese equities remained strong with positive reforms and the MSCI A-share inclusion. If you look at the volumes on the northbound Stock Connect, year-to-date inflow is Rmb275 billion, which is very strong.”
Needless to say, HSBC has put plenty of focus on building up its capabilities in China. Its joint venture, HSBC Qianhai Securities, was launched at the end of 2017. Led by general manager and chief executive officer Irene Ho, HSBC Qianhai was the first Chinese securities joint venture to be majority owned by a foreign bank.
Wu, equity sales director for Asia Pacific, reckons the joint venture has allowed the bank to provide “bespoke services to help clients with our growing research, sales and corporate access teams onshore”.
The firm has offices in Qianhai, Shanghai and now also Beijing, which allows it to not only provide local insights to offshore clients, but also import its global views to clients in the mainland, Wu adds.
“We are fully integrated and collaborate with our onshore colleagues to provide a seamless service to clients,” she says.
As for 2020, HSBC is moderately optimistic on Asian equities, and reckons valuations in the region will remain attractive. The firm is overweight on Chinese, Thai, Indonesian and Philippine equities, but is underweight on Pakistan and Taiwan.
It is also increasing its focus on environmental, social and governance standards – a theme that is of rising importance among investors.
“Questions surrounding ESG and implementation in investment process are being raised by almost every investor,” says Kwok. “HSBC’s recent Sustainable Financing and Investing Survey 2019 revealed that the key drivers of adopting ESG investments are values, followed by returns and regulations.”
To cater to clients’ growing interest in this, HSBC has a dedicated global ESG research team for advisory, including nine ESG experts across Asia, Europe and the US.
CLSA loses weight
CLSA lost its crown in Asiamoney’s brokers poll 2019, ranking second in overall combined research and sales in Asia ex-Australia, China A&B and Japan, as well as for regional research and sales separately.
The bank, which is owned by China’s Citic Securities, lost several of its heavyweights in 2019, including chief executive Jonathan Slone, chairman Tang Zhenyi, star strategist Christopher Wood and Australian bank analyst Brian Johnson, plus a horde of others. The brokerage is now overseen by chief executive Rick Gould, who ran the firm’s Americas business before, and by chairman Zhang Youjun, who also chairs parent Citic Securities.
CLSA may have lost some of its most creative minds, but analysts who are still at the firm are trying to make the best of the situation.
Terrance Liu, who leads CLSA’s China consumer staples team and was voted best analyst for consumer staples in the poll, says there was uncertainty over the firm’s future when the changes in management were taking place. But once the top team was installed, things calmed down, he says, adding that many of the vacant positions have been filled.
“The ship has been steered back in the right direction,” he says.
Whether it will remain on course, however, remains a big question.