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Integrity in research analyses

Following last year's spectacular run in the stock market, 2021 has been a year with a different tune altogether.

The trust level of retail investors towards research analysts is at its all-time low.

"It is understandable and I cannot blame retail investors for feeling that way. After all, many were new investors in the stock market and without the necessary experience and, therefore, they relied heavily on those reports or articles that they read," said Chris Eng Poh Yoon, the chief strategy officer of Etiqa Insurance and Takaful — the insurance and takaful arm of Malayan Banking Bhd (Maybank) — on the sentiment of retail investors towards the research fraternity.

The 47-year-old is a highly respected head of research with more than 20 years of experience in the financial services and consulting industry.

His reputation stems from his days as the head of OSK Research where the popular "OSK Boys" trained under him were regarded as among the best research analysts in town.

Many today are heads of research and corporate leaders in Malaysia's capital markets.

After graduating from the University of Cambridge, Eng started out as an engineer at KTA Tenaga. He then joined the consultancy industry before venturing into the world of research in 2004.

Due to his meticulous nature and acumen, he rose quickly to become the director/head of OSK Research within eight years.

"If you're considering a career as a research analyst, it is vital that you have these three characteristics.

"One, you have to love numbers as there is a lot of number crunching. Two, you must be able to present a good story. Lastly, you need to build good relationships with people, including the management, in order to learn about a company and its business.

"A research analyst must have insatiable curiosity. One must be curious enough to want to know about how things work as well as a company's business model. Don't rely only on annual reports. Going to the ground and subscribing to trade magazines are helpful. Most importantly, integrity is key for a research analyst."

Eng's favourite quote is by former United States president Abraham Lincoln, who said "you can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time".

"One can build the skills as a research analyst based on the three areas mentioned. But you need to have integrity when you write your analysis reports."

Citing the case of the recent run in rubber glove companies that drew a lot of attention before their retracement, Eng said it was an analyst's job to "tell it as it is".

"The analyst must be transparent in terms of the medium to longer term outlook for the company. If the current outlook is great but clouds are there in the horizon, a 'trading' call should be more appropriate. Retailers are not so gullible that the longer term risks should be hidden from them.

"The market can at times be very bearish or bullish, but the majority of the investors are moderates. I noticed that foreign research houses are more aggressive when it comes to their research report."

However, the best practice is for analysts to assess the situation and be objective with their view at all times.

What he misses most about his previous role as a research analyst is the opportunity to meet people and learning all about a business.

In his time as a research analyst, Eng said he visited the operations of all major sectors except mining.

"What other job allows you this kind of privilege? I got to visit different companies, talk to the founders and chief executive officers, and understand their behind-the-scene operations," said Eng.

On how to overcome the trust deficit between the research fraternity and retail investors, his advice is for research analysts to go back to the basics and focus on quality reports instead of churning out quantities.

For retail investors, one must read widely and not rely solely on any one particular analyst's reports.

Lastly, on cryptocurrencies, he said only the credible ones would survive at the end of the day.

He said currently, most of the cyptocurrencies were highly volatile with wild fluctuations.

"There is a need for them to stabilise before they can become a proper medium of exchange."


The writer was a journalist with the 'New Straits Times' before joining a Fortune Global 500 real estate company. This article is a collaboration between the NST and Tradeview, the author of 'Once Upon A Time In Bursa'.

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