Consistency is key : CFA Capital Market Awards helps firms up their game in equity research

Wednesday, 31 May 2023 03:54

CFA Capital Market Awards helps firms up their game in equity research

Businesscafe - With the 2023 edition of the CFA Capital Market Awards due to be held in June, CFA Society Sri Lanka - as the organizers of the event - takes a look back at the award winners from last year, when professionals who established benchmarks for the advancement of domestic capital market participants were recognised and rewarded for a ninth annual time.

Among the five major accolades presented at the CFA Capital Market Awards, the award for Best Equity Research Report looks to reward and recognize analysts producing best-in-class research, and to promote best practices in fundamental equity research and an informed, efficient capital market.

In 2022, CFA Society Sri Lanka bestowed the Gold award in the Best Equity Research Report category to CT CLSA Securities, in recognition of the research house’s report on Expolanka Holdings.

Speaking of the awards, Chairman of CT CLSA Securities Cecilia Page Muttukumaru notes:

“CFA Sri Lanka Society has continuously maintained high standards in the selection of winners over the years.

I believe these awards have contributed to the overall improvement in the quality of research published in the Sri Lankan capital market.

CT CLSA Securities is very proud of its research team, headed by Oshadha de Vas Gunasekara, which won the Gold award for the Best Equity Research Report and the Bronze award for the Best Stock Broking Research Team for the year 2022.”

Spotlight on CFA Capital Market Awards

Looking to differentiate itself from the rest, the team at CT CLSA Securities included a number of insights for both clients and in-house investment advisors in its award-winning equity research report, whilst educating the reader on the relevant industry as well.

In addition, the company went the extra mile to include insights and trends from global freight forwarding companies, to provide context to what the company under coverage was doing and how earnings could be impacted.

CT CLSA Securities also relied on the feedback provided by the CFA Capital Market Awards in prior years and focused on improving environmental, social, and governance (ESG) aspects and sensitivity analysis in their research.

With foreign investors entering the market again, the research team feels that it is time for companies to focus on meaningful ESG reporting, an area that is seeing gradual progress, especially with the greater focus on ESG disclosures from recently listed entities.

When it comes to the impact of the CFA Capital Market Awards on the investment research industry, CT CLSA Securities is of the view that it has raised the bar for investment research and increased both the standards of and competition for stronger research, which benefits the market as a whole.

Consistent coverage and user-friendly info help maintain research ‘A’ game

CT CLSA Securities observes a notable demand for research from foreign clients, primarily for blue-chip companies, and as a result, has maintained consistent coverage.

However, with increased trading activity coming from retail investors in the past two years, it has also reviewed products to provide short, bite-sized pieces of information, incorporating more infographic content that can be easily digested by clients.

Moreover, CT CLSA Securities has increased the frequency of reports for high-impact sectors and macroeconomics-related reports.

Key research challenges have pertained to market volatility, access to information and transparency on the part of listed entities.

Volatile market conditions come with the difficulty of obtaining reliable information and hamper the ability to predict.

With multiple factors to consider, the team at CT CLSA Securities is said to have employed scenario analysis to ensure it covers all bases.

In terms of investor relations, Head of Research at CT CLSA Securities Oshadha de Vas Gunasekara opines, that there is room for further improvement, adding that “in global markets, companies offer earnings guidance, which we don't see in the local market although there has been some improvement.

When such guidance is available, it helps analysts and investors with their research.”

Moreover, companies with good investor relations help analysts publish reports much faster.

Nevertheless, Oshadha notes that companies were forthcoming with information despite the volatile conditions:

“Some of the newly listed companies were a breath of fresh air because they really wanted to come out and make those initial presentations, and put information out there.

They also prompted companies with established investor relations to up their game.”

Irrespective of the volatile conditions, CT CLSA Securities believes that maintaining consistency of research is important.

To this end, it has looked to engage in a continuous dialogue with clients, which has garnered the appreciation of longstanding clientele as it offers them greater assurance vis-a-vis the accuracy of information.

Oshadha asserts that clients rely on CT CLSA Securities to cut through the noise and provide in-depth coverage:

“We try to maintain consistent coverage because that is a unique selling point within the industry, and we look to publish a quarterly report on all the companies under coverage.”

He also notes that apart from understanding fundamental research, it is imperative for analysts to be able to hone their communication and presentation skills and deliver investment theses both concisely and convincingly, particularly in the context of an economic downturn as witnessed in Sri Lanka.

Future expectations are underpinned by optimism surrounding the International Monetary Fund (IMF) program being in place.

Higher activity is also observed on the part of foreign investors, which is considered a positive for the overall capital markets, with CT CLSA Securities believing its team is geared to cater to these investors again.

Nonetheless, the research house states that it will continue to remain cautious of valuations, and incorporate sensitivity analysis and scenario analysis, given continued uncertainty on a number of factors.

Last modified on Wednesday, 31 May 2023 04:02