The Research Firms Helping Investors Navigate a Changing Asia
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The Research Firms Helping Investors Navigate a Changing Asia

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Morgan Stanley is once again No. 1 in II’s annual ranking of research teams in the region

As China continued to lag over the last year, investors have expanded their view in Asia.

“The most important structural development in the last year has been the development of pan-Asia investing,” according to Magdalena Stoklosa, director of Asia Research at Morgan Stanley. “Investors who previously had a narrower focus, for example on Greater China, have widened their mandates to include Japan and India, as well as Asean in some cases.”

Coming into the year, Morgan Stanley’s view was that Asia’s growth cycle was asynchronous and that domestic demand in select economies with structural stories—such as India, Japan and Indonesia—would be the key support to growth, according to Stoklosa. But in recent months recovery around trade has been better than expected. “External demand will now complement domestic demand and lift the trade‐dependent economies—Korea, Taiwan, Malaysia, Singapore and Hong Kong too,” she added. “We are taking on a more constructive growth outlook, as we see more economies in the region posting healthy growth trends.”

Another noteworthy trend: Morgan Stanley has once again earned the No. 1 spot in Institutional Investor’s 31st annual All-Asia Research Team survey. Based on the opinions of more than 3,300 portfolio managers and analysts at more than 400 institutions with major securities holdings in Asia (ex-Japan), this year’s, top firm rankings were produced with the responses from firms paying at least $1 million in Asia (ex-Japan) commissions.

This year marks a decade in the top spot for Morgan Stanley, and the firm holds onto this accolade by the narrowest of margins: J.P. Morgan and UBS tied for runner up with a total of 35 team positions to Morgan Stanley’s 36. BofA Securities and Citi placed fourth and fifth, respectively, in the team leaderboard.

Despite little movement among the top firms in this year’s ranking, there was a lot going on in the region. The story of 2023 was the continued underperformance of China, which “no amount of regional diversification could absorb,” according to Martin Yule, head of Asia-Pacific research at UBS.

“The false dawn for China in Q1 2023, took the whole year to unwind, leaving the market again close to its lows in Q1 2024,” he added. “From there though, we have actual optimism, with the MSCI China having rallied 29% since January’s low, with a broader base of investors participating.” While the China Index is still at half the peak of 2021, Yule said, geopolitics mean that there is still fierce debate as to whether it is a fundamental buy.

Investors have been re‐engaging with China markets over the past few months, according to Morgan Stanley’s Stoklosa. There has been a stabilization in real GDP growth and a buildup of policy positives, which have helped to improve investor sentiment. The latest measures include efforts to stabilize the property market, including off-market home purchases by local governments. “We believe that the combination of these factors will help to stabilize real growth, but more is needed to sustain healthy levels of inflation over the longer term,” she added.

In 2024, China is much more of an even-sided debate, having cycled the most positive economic comparatives that were driven by the “re-opening trade” of Q1 2023, Yule concurred: “Valuations elsewhere are also fairly uniformly higher than they were twelve months ago.”

What effect has all this had on the top sell‐side research firms this year? China's economic difficulties have led to a challenging environment for earnings at the index level though some individual companies have been able to buck that trend. “Our emphasis has been on stock selection and alpha opportunities,” Morgan Stanley’s Stoklosa said. “Our regional and global research platform has helped clients effectively navigate this environment and allowed clients to better contextualize their investment approach to the region, including how best to approach the China investment environment.”

At J.P. Morgan, client hours for its Hong Kong/China team are up 20% in the first quarter of this year versus the last quarter of 2023, according to James Sullivan, head of Asia Pacific equity research for the firm. Additionally, the HSCEI is outperforming the S&P 500 year to date. “Our core belief is that there are significant bottoms up investment opportunities in multiple markets around the region, regardless of index performance,” he added.

As regional investors have looked to deploy assets outside of China, Japan and India were the most obvious beneficiaries, according to Yule, and UBS has been dedicating resources to these markets. “We have been investing in our footprint in these markets, and expanding coverage,” he said. “Our teams have had strong demand for market education from many investors with effectively greater China mandates. It will be interesting to see whether this ‘China export’ investing is sustained through more positive China market performance.”

An additional II leaderboard was created for individual analysts, economists and strategists at these same firms. J.P. Morgan topped that ranking followed by Citi in second place. Morgan Stanley took third while UBS was fourth. BofA Securities rounded out the top five.

J.P. Morgan’s Sullivan credited the firm’s culture for allowing individual analysts to thrive. “We believe that giving every analyst the space to ask the next great differentiated question, and then supplying them the resources and the global network to fully pursue their intellectual curiosity allows J.P. Morgan to offer the best insights and context across markets and asset classes to our clients,” he said.

Brent Robinson, head of the research cluster for Japan, North Asia & South Asia at Citi, said the firm’s analysts are able to offer a commercial and differentiated angle to investors. “We have the lowest number of neutrals while having a higher percentage of sells than our competition. In conjunction with our fundamental 12-month view, our Catalyst Watch product offers a short-term tactical investment view. We are able to cater investors with different investment horizons,” he concluded.


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