Overall 40% of respondents reported fewer stock broker research
analysts covering them in the last 12 months. 71% of ASX 100 companies
in the survey said they had had a decline in the number of stock broking
analysts covering them.
However, 26% of respondents reported an increase in research coverage. Of these, the majority (71%) are outside of the ASX 100.
47% of companies reported a recent decline in the quality of broker research.
53% of respondents who attended UK stock broker conferences said there had been a decline in the quantity of meetings.
More than one broker now often required to organise meetings as well as companies having to approach some investors directly.
Of 46 stock broking analyst changes over the last 12 months, nearly one-third have gone to the buy-side.
A survey released today by the Australasian Investor Relations
Association (AIRA) finds that, while the so-called new MiFID II
regulation in Europe doesn’t directly apply elsewhere, they are forcing
companies to find new ways of communicating with global investors to
ensure markets are properly informed about their activities.
The survey of 54 companies mostly in the ASX200 and NZ50 indices
showed that research coverage by investment banks has fallen sharply. In
some company’s, that is a direct result of many investors refusing to
pay new charges required under the MiFID II law for research,
conferences and meetings provided by brokers.
The survey also
found that fewer investors attended global investment conferences held
in recent months. This occurred even outside of Europe, in major
financial centres like New York and Hong Kong. Many companies are now
being forced to hire internally to bolster their capacity to engage
directly with existing and prospective investors.
regulation is having a rapid and deep impact on the way companies engage
with their owners,” AIRA’s chief executive, Mr Ian Matheson, said. “The
global nature of investing means that a law passed in one continent can
have a rapid knock-on effect elsewhere.
“Investment banks were
already cutting their research coverage, but that is being slashed even
further. Our survey finds 40% of respondents had fewer analysts covering
them over the last 6-18 months. If that’s not enough, 47% said research
quality had also decreased. This is, at least in part, likely to be
because many leading analysts are being poached by new independent
research houses and funds management firms.”
“This is also having an impact on consensus earnings estimates, used
by investors to make decisions on whether to buy, sell or hold”, Mr
Matheson said. “Not only is there less research on which to base the
estimates, but many listed entities report the quality of research and
therefore many forecasts have declined making the consensus or average
of the analysts’ forecasts less reliable.
“Companies are increasingly concerned about the accuracy and
timeliness of consensus estimates. The worry is that fewer brokers will
issue these numbers, and investors will be less informed. Some
investment banks no longer make them available through third party
Respondents to the survey also noted they were now increasingly being
asked to make their own appointments with investors directly rather
than being arranged by investment bank. Some 27% of survey respondents
who recently attended broker conferences were asked by investors to line
up meetings directly.
“It is clear that investor relations activities are going to be
managed more in-house by companies as a result,” Mr Matheson said. “The
survey found that 54% agreed that they needed to change how they engage
and communicate, and that more are now saying that they will employ more
“Shareholder engagement is such a critical matter for listed
companies that it seems inevitable that they will become more involved
with their own programs and budget for higher costs.”
In a separate survey of members’, we identified 46 moves amongst
stock broking analysts over the last 12 months. Nearly one-third were
understood to be moving to the buy-side and 15% said they were going to a
new independent research firm. These moves are indicative of the
structural changes occurring in sell-side research making it even more
important for listed companies to build strong relationships with
portfolio managers and analysts.
For more information, please contact:
Ian Matheson, Chief Executive Officer, AIRA?
T: +61 2 9872 9100
M: 0419 444 731
The Australasian Investor Relations Association (AIRA) was
established in 2001 to advance the awareness of and best practice in
investor relations in Australia and New Zealand and thereby improve the
relationship between listed entities and the investment community. The
Association's 160 corporate members now represent over A$1.2 trillion of
market capitalisation, over 80% of the total market capitalisation of
companies listed on ASX.