Sell-side research is faced with the dual problems of revenue model and market influence, and Changjiang** and GF** have always occupied the top two places in the "local gold medal research team" award, forming a long-term pattern of "two supers" in fact.
*Wen. A few days ago, the "2023 17th Sell-side Analyst Crystal Ball Award" hosted by **Market Weekly, the selection event came to a successful conclusion, with 745 research teams and 41 sales teams from 41 sell-side research institutes in China, and a total of 2,694 candidates participating in the competition for 38 "Research Individual Awards", as well as "Research Institution Awards" and "Sales Individual Awards".
In the end, according to the comprehensive total score of the "Research Individual Award", Changjiang**, Guangfa**, Xingye**, Tianfeng**, and Shenwan Hongyuan won the top five of the "Local Gold Medal Research Team". Since 2018, Changjiang** and GF** have occupied the top two of this total score award, forming a long-term pattern of "two super" awards. This may reflect that in recent years, brokers' investment in sell-side research has entered a relatively stable stage after reaching its peak, corresponding to the stability of the list pattern.
In terms of voting institutions, 109 public offerings above designated size and 87 insurance, asset management and proprietary institutions above designated size participated in the voting, covering most of the important buy-side institutions in China.
Judging from the selection results, 32 research institutes entered the top five in each field, and the number of awards has expanded compared with last year.
Since its inception in 2007, the Crystal Ball Award has always adhered to the selection principle of "fairness, justice and openness", and has been committed to discovering the best research institutions and analysts in China and promoting the healthy development of the local capital market.
In the past 17 years, based on PwC's independent vote counting, the Crystal Ball Award has been attended by tens of thousands of people, and the fairness and accuracy of the vote counting results have been effectively guaranteed, which is also an important foundation for the smooth development of the past 17 years.
A-share performance is sluggish, and sell-side research is struggling
The brokerage business is highly cyclical, and sell-side research is no exception. The lackluster A** market in 2023 has brought great challenges to sell-side research.
Except for the mid-year wave of AI**, which is more sustainable, most institutions have performed poorly in the direction of heavy positions throughout the year. At the end of the year, the actual high returns mainly came from trading varieties such as micro-cap stocks and the Beijing Stock Exchange, which made it difficult for sell-side research, which mainly looks at large companies and fundamentals, to provide alpha returns.
In the past two or three years, the two major directions of track stocks and new energy have been hit by "high valuation" and "no capital to take over", resulting in several major indices hitting new lows and almost reaching the "zero quantile" of valuation.
Some investors said: "All indicators have failed, including the difference between stock and bond returns, the bottom of valuation, and the CSI 300 has fallen for three consecutive years."All investment routines have failed, including boom investment, reversal of difficulties, and net profit faults. ”
In the above context, the seller's research can only be "a dojo in a snail shell". Due to the close relationship with the public offering, with the sharp year-on-year decline in the scale of active equity subscription of the public offering in 2023 and the sharp decline in its influence on the market, sell-side research is also facing the dual problems of revenue model and market influence.
Looking back on 2023, equity investors have achieved significant gains in three main areas:
First, the aforementioned micro-cap stocks and the Beijing Stock Exchange have avoided net sellers such as foreign capital and public offerings, and have become trading varieties with capital shrinkage
The second is to invest overseas to earn beta income in the relevant market;
The third is based on macro understanding, through the control of excess returns. Looking at the rearview mirror, at the beginning of 2023, there are indeed brokerages who are looking at the macro. The most typical is Fu Peng, the chief economist of Northeast China, who put forward "strong expectations and weak reality". On March 28, he wrote on Weibo: "Since the end of January, although many people have strong expectations for 2023, the reality of economic performance is that it is not worse, but there is no expectation difference of super strong expectations. "Indeed, in 2023, under the reality of a lukewarm macroeconomy, the market is expected to decline significantly throughout the year compared to a more stable reality. By the end of the year, judging from the performance of the bond market and **, market expectations were too pessimistic. As the macro economy moves from stable to rising in 2024, market expectations are expected to turn optimistic.
The above three areas are not mainstream funding strategy directions and sell-side research can provide alpha, which makes sell-side research difficult to develop.
From expected reality to expected "expected" The number of research reports "volume" to the sky
Sell-side research is already a stressful industry, and in the severe external background of 2023, sell-side research has also stepped into a cycle of more and more volume, and the research has become more and more in-depth. For example, if there is high-frequency data, if there is a daily frequency, you don't look at the weekly frequency. The obvious phenomenon brought by the volume, the actual data has changed a little, and the expectation is much more preemptive. It is necessary to anticipate not only reality, but also "expectations".
Because everyone is rolling, for fear of grabbing a little slower than others, so when you see short-term data, you will first trade the medium and long-term logic. For example, at the end of 2022 and the beginning of 2023, in the medium and long term, the economic recovery in 2023 will not be very strong, after all, the scars of the three years are still there, but what is certain is that 2023 will recover relative to 2022, but the market will "fill" the expectations of economic recovery. As soon as the data is available, the core will rise by 50% first. For fear of falling behind others.
In such a rhythm, sell-side research, as a source of important information, is naturally the "king of volumes".
According to the Financial Associated Press, as of November 17, 2023, 2,348 analysts from more than 90 brokerages have released about 180,000 research reports, including 1,603 in the depth category, 3,783 in the ** category, and 963 in the industry category. As a rough estimate, this is equivalent to about 564 research reports per day for sell-side research.
CITIC** ranked first in the number of research reports, with 9,301 research reports.
Based on the 319 calendar days as of November 17, Nissan has as many as 57 analysts in a research report;Based on 218 working days, 14 analysts can produce 2 research reports per day, and a total of 191 analysts can produce 1 research report per day.
The number of research reports by some analysts is extremely high, among which Ming Ming, chief economist of CITIC**, ranks first in the number of research reports since 2023 with 928 articles.
The number of research reports is formed by multiple reasons, one is the industry research attributes, fixed income and other data update frequency is high, and the research reports will naturally not be less;Second, the number of research reports is different due to different signatures of the chief analyst for various reasonsThe third is the difference between the function of the researcher and the external service or the internal serviceFourth, due to the depth of research and greater influence of some research directions, the output of research reports is less, and there are more other reasons that can lead to different research reports. In general, the number of research reports reflects the workload of analysts to a certain extent, and the ability of analysts cannot be judged simply by the number of research reports, but too much or too little is not appropriate, and the quantity needs to be increased normally under the premise of controlling the quality of research reports.
At the same time as the number of "volumes", the issuance of a research report is the extraordinary efforts of analysts and the team. For analysts, making valuable research and being recognized by customers is the foundation of everything. The value of research is generally reflected in breadth, depth, and forward-looking. This usually means a significant investment of time and effort from analysts.
In the case of serious service homogeneity, everyone is studying the same target, and timeliness has become an important influencing factor. Analysts can only work hard to ensure timeliness, 365 days a year, working until more than 12 o'clock every day. Diligence and hard-working are indeed essential qualities in this industry. Non-stop work can be a huge physical and psychological stress.
Public offering rate reduction and regulatory strengthening Sell-side research has experienced the test of revenue model
In 2023, in the context of the strengthening of financial supervision and the concern of public offerings, the reform of public offering rates will be rapidly promoted. On December 8, the China Securities Regulatory Commission issued the "Regulations on Strengthening the Management of Public Offering Investment" (Draft for Comments) to solicit opinions from the public, marking the start of the second phase of the public offering fee reduction reform, which focuses on commission distribution and rate reduction, and the rate is expected to drop by 33%.
At present, the commission rate for different customers is roughly 8% for public offering and 2%-2% for private placement5%, insurance 3%-5%, *15%, of which the higher commission rate of the public offering is a favorable condition for the seller to study the income model of the distribution point.
In 2023, not only will the commission rate be significantly reduced, but the commission distribution will also be directly constrained by the regulator. According to the Consultation Paper, it is strictly forbidden to use transaction commissions to transfer payment fees to third parties, including but not limited to fees arising from the use of external expert consultations, financial terminals, research platforms, databases, etc. In addition, the manager shall establish a business isolation mechanism such as trading, investment research, and sales, and sales personnel shall not participate in business links such as company selection, agreement signing, service evaluation, and transaction commission distribution.
In the face of the impact of the main revenue model, blogger @Flora of the stars said that the sell-side research institute can take a plate of its own fundamentals: 1The income of the institute mainly depends on other types of customers such as public or private placementIf there are many private equity customers, the impact will not be so big this time. 2.Have you ever received a research consultant fee?The kind that is not in the sub-warehouse and is directly charged. If you have experience with this kind of charge, immediately see if there is reproducibility, replicability means room for scale. 3.Reclassify your income and investment to see that it was purely based on the soft dollar that 12 times the difference back, the next if there is really none.
The senior industry research blogger @Dong Gui squeezed out the two dimples and believes that the long-term change in the income model is good for the head research institute and sell-side research to return to its origins. Although most of the analysts are tired of winning customers by "service, not research". However, under the distribution mechanism, fundamental research is still easy to become in the end, inquire about news, engage in interpersonal relationships, do things, and even help the manager solve personal life problems, which will have sell-side analysts to do PPT to analyze the situation of the manager. However, with the head of the seller's research institute, although the first has the right to distribute interests, if there are only a few left, the strength of both parties is equal and the importance of relying on service to please has declined, so you can do research quietly.
In short, 2023 will be a year of testing both research impact and revenue models for sell-side research, and changes may be happening.
Sell-side analysts are in the spotlight Analyst selection helps it grow
Analysts are professional researchers in the market, which is also an important way of capital market information, analysts through their own information collection channels and professional research and analysis capabilities, to find the information content that reflects the reasonable value of the asset target, and to provide information mining and transmission services for market participants, so as to improve the efficiency of capital market resource allocation.
The nature of the research analyst's analysis helps us understand the nature of the information contained in the analysis. Therefore, the accuracy of the information provided by the analyst is related to the market value of the analyst, and the relevant research shows that the research report of the sell-side analyst is still the most important and influential channel of information for investors.
*Analysts are divided into two categories: buy-side analysts work for investment institutions such as public offerings**, pension** and insurance, and sell-side analysts work for ** institutions (including investment banks) and publicly provide research results and publish research reports. Because buy-side analysts provide information about the company's internal services and do not disclose their research results to the public, the market's focus on ** analysts is on sell-side analysts.
The "Sell-side Analyst Crystal Ball Award" was officially launched by Market Weekly in 2007 and has been held annually for 17 years.
Since the first edition, the organizer has invited PricewaterhouseCoopers as an independent vote counting agency. Morningstar (2007-2014) and Grid Wealth Management (2015-2023) will provide a list of eligible private placement** voters as co-organizers.
The candidates for the "Sell-side Analyst Crystal Ball Award" are mainly brokerage research institutes that carry out sell-side research business, and the overall participating institutions have not changed much since the event was held.
The candidates to participate in the "Sell-side Analyst Crystal Ball Award" are mainly sell-side analysts and sales managers, and after standardization, analysts are required to have the best investment consulting (analyst) qualifications when registering, and have not been punished by the Securities Regulatory Commission and the association. The organizer confirms the relevant qualifications of the candidates through the **industry association** according to the registration list.
The voting institutions participating in the "Sell-side Analyst Crystal Ball Award" are mainly buyers in the A-share secondary market, and the main types include: public offerings**, qualified (above designated size) private placements** and other types of institutions. In recent years, the number of voters has increased continuously.
The 2023 event process includes: determining candidates, determining voters, printing a voting booklet, distributing a voting booklet, voting people voting, voters sending it back, PwC counting votes, and announcing the results.
The purpose of the event is to encourage analysts to improve their research and improve communication with buy-side institutions. From the effect point of view, driven by the selection of various sell-side analysts, various research institutes have launched a healthy competition to jointly make the sell-side research market bigger and stronger, and become one of the most eye-catching areas in the investment industry, from the number of analysts and sales managers to the number of research reports, have shown geometric growth.
In recent years, there has been a significant increase in regulation of sell-side analyst polling activities. The organizers of the Crystal Ball Award have made corresponding adjustments in response to the situation. In 2023, the organizer will continue this direction, take compliance as the guide, further improve the level of event organization, improve event rules, and strengthen information disclosure.
Judging from the list of this year's "Sell-side Analyst Crystal Ball Awards", a total of 32 research institutes entered the top five in various fields, and the scope of awards has expanded compared with last year.
Sell-side research has been growing with China's capital market for nearly 20 years since its inception. Sell-side analysts have been cautious and unscrupulous, providing professional and high value-added research services for buy-side institutions such as public offerings.
In the course of the development of sell-side research, there have been many remarkable key figures, including the respected pioneers in the field of sell-side research in China, the reformers and leaders of enterprising sell-side research institutions, and the star-studded analyst team. They have not only made outstanding contributions to the development of the industry, but also promoted the improvement of the efficiency of China's capital market. Under the leadership of sell-side research institutions, fundamental analysis and value investment have taken root and flourished in China's capital market.
In recent years, the financial industry has entered a cycle of strong supervision, and the orientation of serving the real economy has been significantly strengthened. Under the new situation, the analyst group, which plays an important role in the communication of information between listed companies and investment institutions, will still have a lot to do.
At the same time, after years of development, sell-side research institutions have become quite self-disciplined and mature, and can play a more important role in providing effective information and stabilizing expectations for the market.
At present, analysts return to research and reduce the interference of non-research affairs, which is not only a regulatory orientation, but also the general trend of research institutes serving the real economy and analysts reflecting their own value. However, at the same time, sell-side analyst selection, as an effective supplement to the analyst evaluation mechanism, will still be indispensable in one stage. In this regard, the organizers of the Crystal Ball event hope to play a role in cooperation and benign promotion in the rebalancing of the interests of all parties on the basis of comprehensive consideration of regulatory orientation, the needs of the research evaluation mechanism and the realization of analysts' personal values.
At present, the transformation of China's economy and capital market is still in the process, and sell-side research is also facing new challenges. I wish Sell-side Research can explore better industry forms and business models, achieve a higher level of research, have stronger service functions, and make new contributions to the rapid development of China's capital market