IT CERTAINLY SEEMS as if there is a bloodbath on the streets for investment analysts these days. Almost every time you open the newspaper you see reports of more of them getting the chop. Last week there was a wholesale lay-off at Indosuez WI Carr Securities.
All the obvious reasons for it have been cited. Times are tight, commissions are falling, electronic broking is taking over and analysts have done themselves in with all those dubious 'buy' recommendations made at the behest of their corporate finance departments. Clients will no longer pay for broker research.
All this is true but, from my experience of 18 years as an investment analyst, I see something else happening here. Investment analysis is swinging from the 'sell' side to the 'buy' side of the trade. Investment analysts are not vanishing. They are just growing quieter because their employers no longer require them to make noise.
Let us go back in time. When I began as an investment analyst for Sun Hung Kai Securities, back in 1980, there were no electronic data bases, no e-mail, no fax machines and no computers on the desk. Analysts armed themselves with calculators and the computer was a big box that took up a whole room, an off-limits room too.
There certainly was interest in the market on the part of big institutions but let us put that into perspective too. They were not big in today's terms. A client with US$100 million under management was a big one. That much money today would only make the client a start-up hedge fund with a little comfort in his income.
Naturally these people did not have much money to hire analysts for themselves. Add to this Asian markets outside of Japan were remote, small, and closed or semi-closed except for Hong Kong and Singapore and the economics of the business said you relied on your brokers for research.
Now remember again the absence of computers and communications technology and you can understand that there was certainly a good deal for broker research to offer. Just to see a company and write a short report setting out how its business was put together was of value to clients.
