Singapore's Second-Largest Lender Plans a Push Into Hong Kong ResearchBy and
Bank to add coverage of 60 stocks, with 14 to 20 by year-end
Research arm had previously focused on local mid-cap firms
Singapore’s second-largest lender has decided that the best place to expand its research is the country’s rival market Hong Kong.
Oversea-Chinese Banking Corp. plans to add coverage of 60 Hong Kong-listed stocks, with 14 to 20 started by year-end, according to Carmen Lee, its head of research. That would supplement the around 75 firms already tracked by Bank of Singapore Ltd., OCBC’s private banking unit, she said.
OCBC previously invested in mid-cap coverage of Singapore stocks in an attempt to dominate that area of its home market. But it was difficult to generate trades because the companies were too small for many clients, Lee said.
“Hong Kong is now our No. 1 overseas market,” Lee said in an interview in Singapore. “The names are so familiar. Everyone knows about Ping An Insurance Group, China Life Insurance, Tencent Holdings and Baidu. It’s very easy to promote Hong Kong ideas.”
Lee’s team has already started coverage of China Evergrande Group, Fosun International Ltd. and China State Construction International Holdings Ltd., she said. The firm initiated coverage on China Evergrande and Fosun this month and China State Construction in September.
Hong Kong Volume
Hong Kong’s stock market had average daily turnover of HK$95 billion ($12.2 billion) in September, compared to less than S$1.15 billion ($843.6 million) in Singapore. Singapore’s stock exchange has accelerated efforts in past months to increase trading in the city-state, as its average daily value of shares traded remains at less than half its average level of S$2.4 billion in 2007. A penny-stock rout in 2013 shook confidence in the city’s markets.
Nevertheless, OCBC remains focused on its core home market, Lee said. She prefers mid-cap property developers in Singapore and says domestic bank shares could continue to rise, even though they’ve become more expensive. (OCBC itself, for example, has gained almost 30 percent in 2017 alone and now trades at 13 times reported earnings, versus its five-year average of 10.5 times.)
The bank’s shares rose 0.8 percent in Singapore trading on Wednesday, as the benchmark Straits Times Index added 0.3 percent.
Under Lee, OCBC’s research group has taken the unconventional approach of relying more on younger analysts, she said. Her team consists of six analysts, excluding Lee, with an average age of 30. Younger researchers are more willing to take on new ideas, and are also less attached to “core old economy stocks like banking, manufacturing, conglomerates,” Lee said.
“With young analysts, I find that they’re very enthusiastic,” Lee said, elaborating about her team’s newer analysts that "they’re fantastic with computers. They’re fantastic with presentations."
At the same time, Lee said her team’s senior analysts play an important role in actively mentoring the younger analysts. Even though "older analysts sometimes tend to be very fixated about certain areas," she said, they possess a wealth of experience and knowledge that they can share with their younger peers.
The bank is planning to take on two more people for its push into Hong Kong, and ultimately intends to have staff in Hong Kong as well, according to Lee. The companies the bank is starting to cover are all group efforts, rather than being dominated by a single analyst, she said.
“It’s quite unusual,” Lee said. “Perhaps we are the only house in the market that does that,” she said. “Usually most analysts in the past will just want to take 100 percent ownership.”
— With assistance by Abhishek Vishnoi