Research Demand Grows in Asia

Demand for independent research in the Asia-Pacific region is set to grow, and both international and local research providers plan to increase staff numbers in Asia and launch new research tailored for local customers as a result.

"Although times are still quite tough, things are getting better, and there’s a growing demand for [equity research] in the Asia-Pacific," Charles Wheeler, director and general manager of Asian equities at Standard & Poor’s (S&P) in Hong Kong. The demand is being driven by an upturn in economic conditions in the Asia-Pacific region, he says. "The stock markets are going back up. People weren’t going to buy research when the markets were tumbling, although they may have needed it."

Wheeler is gearing up to make new hires throughout the region in 2004 to meet this expected increase in demand. Exact plans have not yet been finalized, but there will be additions to the company’s team of eight analysts in Singapore, three in Hong Kong and one in Tokyo, according to Wheeler. He says that there will likely be new staff added in Japan in the second and third quarters.

He also reveals that S&P is planning to open a new office in Kuala Lumpur with two equity analysts by April.

The company also has China in its sights. "China is difficult and a very large investment, but we certainly want to go there," says Wheeler. "I would think that within a year there ought to be some sort of activity [in China]."

But large international companies are not the only ones set to benefit. Research vendors that can provide specialist regional knowledge look to be in particular demand. A market data manager at an international investment bank based in Singapore points out: "Obviously people have different needs, so in Thailand they will use domestic research [alongside international research] and likewise in our other locations in places such as Singapore and Korea… local content is vital."

This is good news for companies such as Profit Research Center Ltd. in Tokyo, whose products include Japan Liquidity Watch, which contains detailed macro-economic information on Japan and covers key aspects of the political landscape.

"So far the independent research business had already been well established in the US, but it had been lagging in Asia," says Richard Werner, chief strategist for Profit Research Center Ltd. "This is now beginning to change as corporate governance is improving, transparency is increasing and conflicts of interest are increasingly frowned upon.

"Clients are becoming more aware of the conflicts of interest afflicting the research provided by brokers and securities houses. Many have started to prepare budgets for independent research."

But Werner admits that there are hurdles to overcome. "Traditionally, especially in Japan, it had not been practice to pay for receiving information," he says. "Many Japanese potential clients are still stuck in the old mindset, believing erroneously that information is or should be free. However, the value of good information and insightful, unique analysis is gradually being appreciated."

S&P’s Wheeler agrees: "The problem that you face is convincing people that they should be paying for what they think they have been getting for free."

He says that S&P is addressing this challenge by "emphasizing its independence" and offering a broader range of services. For example, he says the company will undertake specially commissioned research that can be published jointly with the client or white-labeled to appear as the client’s own work, he says. Nordea is one such client (IMD, April 17, 2003).