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Bank of America Merrill Lynch

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Star BofA Merrill Lynch analyst sacked after Hong Kong IPO is pulled

Top-rated researcher at Bank of America Merrill Lynch asked firm eyeing US$150m share offer 'challenging' questions on profitability

PUBLISHED : Friday, 14 June, 2013, 12:00am
UPDATED : Friday, 14 June, 2013, 10:25am

A top-rated analyst has been axed by Bank of America Merrill Lynch from its Hong Kong health care and pharmaceuticals research team after a US$150 million share deal the bank was working on stalled.

Tong Shaojing told the South China Morning Post he was fired from his job within days of a proposed Hong Kong listing of shares in the mainland-based Triplex Biosciences being put on hold.

"I can confirm I was fired by the bank and HR told me it was not because of any problem related to my performance," said Tong, who was part of the team working on the Triplex deal.

Sources with direct knowledge of the matter say Tong, who was regularly ranked among the top three China-focused analysts in his sector, was let go on March 19 after Triplex and its bankers decided the previous weekend to hold off on the listing. The original plan had been to start marketing to investors in the week of March 17, they said.

The sequence of events has puzzled peers at rival banks and sparked much debate among Tong's former colleagues at Bank of America Merrill Lynch.

It is rare for a major investment bank to lay off a top-ranked analyst, in particular when the analyst is involved in a transaction. Market participants say it is rarer still when a deal is dormant, not dead.

Triplex has told Bank of America Merrill Lynch and other banks working on the sale that it wants to revive its initial public offering in Hong Kong later this year, sources with direct knowledge of the matter said, on condition of anonymity.

The bank and China Merchants Securities (Hong Kong) were the two lead sponsors for Triplex, which makes products used to detect and diagnose certain cancers from blood and tissue samples. Goldman Sachs also was a book-runner in the deal.

In the most recent research analyst survey by Institutional Investor magazine, released last month, Bank of America Merrill Lynch was ranked third in Asia for its coverage on the health care and pharmaceutical sectors. It was a team award and Tong's name was still mentioned.

The bank captured 33 positions, with 16 of its analyst teams considered the best in their sectors, outperforming many of its long-time competitors, such as Morgan Stanley, JP Morgan and Citigroup.

Tong, a director-level analyst in Bank of America Merrill Lynch's equity research department in Hong Kong, had quizzed senior executives of Triplex about the profitability and operation of the company, according to sources who were also present at those internal meetings.

"Some of the questions he asked in front of senior executives of Triplex sounded very challenging and these questions apparently didn't make Triplex's people feel too comfortable," one of the sources said.

Bank of America Merrill Lynch and Triplex declined to comment when contacted by the Post.

By law, investment bank research analysts must provide unbiased views on the companies and deals they cover. The so-called Chinese wall provides the ethical separation point that all financial market participants are expected to respect to avoid conflicts of interest.

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impala
"By law, investment bank research analysts must provide unbiased views on the companies and deals they cover."

Hahaha. Yes, that is true. And it also one of those things that everybody in finance silently understands to be nonsense. A fig-leaf. Analysts will nearly always be much more positive about those companies their colleagues in capital markets are doing business with, or are trying to close a new deal with. This is one of the big reasons there are always so many more 'Buy' than 'Sell' ratings.

The research department of a bank is a cost centre. Pure money down the drain for the bank. The analysts there don't earn the bank any money. It is the people in capital markets and trading that make the money. The research is just a sweetener for the latter group's clients. A sales tool to get clients trading etc. So guess who calls the shots at the top? The MD from the 'independent' research department? Or the MD from the sell side?

This is further compounded by the fact that analysts need access to the company to do their job well. All analysts base themselves on public information, but it is still worth gold for them to get that little edge over their peers and hear news hints from the horse's mouth. And how to best get that access to execs at the companies they cover? Indeed, by being chummy with their capital markets/sell side buddies.

Apparently Bank of America can't be bothered to uphold even just a thin appearance of analyst impartiality anymore.
wsfgroupltd
Is time for muddy waters to get involved !
 
 
 
 
 

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