Lack of Analyst Coverage on the NZX (New Zealand Stock Exchange)
The Capital Markets Development Taskforce currently reviewing the New Zealand financial markets released am interim report this week. Media reports have focused on a range of issues - one of which is a lack of analyst coverage.
From page 14 of the interim report:
“Work commissioned for the taskforce has found that there is no analyst research is available on 42% of the companies listed on the NZX, and a further 13% of companies have only one or two analysts covering them.”
We would disagree with that assessment. Here at Valuecruncher we cover 156 companies listed on the NZX. This is more than 42% of the companies on the NZSX. We have valuation tools available for companies from Telecom New Zealand ($TEL.NZ) to Xero ($XRO.NZ).
Telecom New Zealand ($TEL.NZ) - Valuecruncher Interactive Analyst Report
Xero ($XRO.NZ) - Valuecruncher Interactive Analyst Report
Now our reports are not the “typical” analyst reports. But we would argue that the current analyst model looks broken - the current model is too expensive and produces research reports that are complex and hard for retail investors to consume. Those are some of the reasons that there is a lack of traditional analyst coverage in markets like New Zealand.
We believe that equity research will change moving forward and while we may not yet know what the final solution looks like - it will be different to what has gone previously. Parties like the The Capital Markets Development Taskforce should be looking at different more innovative solutions and how those can be encouraged.
Clay Shirky - “That is what real revolutions are like. The old stuff gets broken faster than the new stuff is put in its place. The importance of any given experiment isn’t apparent at the moment it appears; big changes stall, small changes spread.”
Financial markets need experiments. For small markets like New Zealand - these are vital.
August 4th, 2009 at 7:51 pm
I think you will find that the CMDT is looking at a range of options regarding provision of research.
You are too quick to shoot from the hip. And to claim your page of data is ‘research’ is somewhat removed from what organizations like NASDand SGX consider to be research. Before blowing your own trumpet about how good you are perhaps you might like to brush up on the definition
August 10th, 2009 at 9:09 am
I am saying that we need to stop thinking about “definitions”. There is no point in comparing track times when the race is no longer run on a track.
I do say “Now our reports are not the “typical” analyst reports”. Traditional research is headed in the same direction as newspapers (IMHO).
It is time to re-think “research” - it is time for experimentation.
For markets like New Zealand - we are an example of what that may look like. But conversely it may not be anything like what we provide.
That is what I am saying.
August 11th, 2009 at 10:24 am
Broker (sell side) research needs to be looked at for what it is - a catalyst to get an investor to buy or sell a holding. It became fundamentally broken as a good investment guide as soon as the opinions and recommendations started changing with the wind so the broker could increase brokerage revenues.
Add to this Feltex, Nuplex and now CadmusProvenco, you would have to say broker research isn’t worth the paper it is written on. Quantity is therefore irrelevant to New Zealand. The quality of the research and the quality of the companies listed need to be addressed first. A pig is a pig. 20 more pigs just means more snouts in the trough but they’re still pigs.
Valuecruncher seems an infinitely more honest approach because it allows the investor to view long term scenarios rather than being pushed and prodded into new directions each quarterly statement.