Nirgunan Tiruchelvam has been through some difficult days as a senior equity researcher in Singapore, but is adamant that the job function has a bright future.
He was a director of ASEAN consumer research at Standard Chartered when the bank shuttered its Asian equities unit in 2015.
And as global banks continue to trim their equities teams in Asia, Tiruchelvam is open about the challenges facing those who still work in the sector.
“At banks, equities is being disrupted by online research marketplaces and ETFs, so costs are under pressure. The number of equity analysts and salespeople in Asia is shrinking and the commissions received are getting smaller,” says Tiruchelvam, who is now a director at Religare Capital Markets in Singapore.
Still, Tiruchelvam doesn’t believe equity analysts will become obsolete.
“The profession provides value to clients that ETFs or online research providers can’t match. Equity analysts play a fundament role in assessing whether a company is overvalued or even whether there are non-compliant practices happening,” he explains.
Equity analysts must, however, adapt the way they work in order to remain relevant to clients.
“Driven in part by the MiFID directive, banks in Asia and globally are moving away from the carpet-bombing approach of covering hundreds of companies in every sector and flooding the likes of Fidelity and Wellington with advice,” says Tiruchelvam. “Analysts need to focus on fewer companies, with an emphasis on quality coverage.”
To succeed as an equity analyst you also have to “stay clear of the consensus”, he adds. “For example, in 2008 I made the radical suggestion that Singapore agri-business Olam International was overvalued. That then proved correct when the firm was accused of poor accounting practices by the short-seller Muddy Waters.”
“As an equity researcher, you need to stand your ground and tell people exactly why you hold a particular point of view,” says Tiruchelvam. “You need to withstand pressure and act independently within your bank, even if your research might affect a client of another department in the bank.”
If young analysts want a long-term career in equity research they must “focus as much on nurturing client relationships as they do on providing great market insights”, says Tiruchelvam.
“A client relationship is cemented with face-to-face meetings – this is something a lot of junior analysts overlook. The value of relationships has been diminished in a world where most connections are made online,” says Tiruchelvam.
Tiruchelvam is now developing new relationships himself. “One of the key things we’re doing at Religare is working more with the large family offices that are increasingly setting up in Asia. Many of them want new ways to access mid-cap companies, and we provide opportunities that they couldn’t find on their own.”
“The most interesting part of working in equity research is the opportunity to meet companies and investors, and play a pivotal role in making connections between them,” he adds.