Bank of America Corp. has once again landed at the top of
Institutional Investors annual ranking of
Emerging Europe, Middle East and Africa Research, the
banks fifth year straight year as the regions best
Citigroup Inc. and JPMorgan Chase & Co. tied for second
in IIs survey of 680 individuals at 358 institutions in
emerging markets. Citi rose to the No.2 spot this year, from
third place in 2016, while JPMorgans position was
unchanged from a year ago.
The rankings leaders have been gearing up for the
implementation of the second phase of the Markets for
Financial Instruments Directive, European regulation taking
effect in January that will separate banks research
departments from their trading teams. This change may prompt
investment firms to reconsider how theyre paying for
research, possibly resulting in reduced spending in such
outlying areas as EMEA.
Our view is that in a Mifid world, we want to have a
global presence, Heath
Jansen, Citis head of research for Central and
Eastern Europe, Middle East and Africa, said by phone. We
also want to have highly ranked analysts who can differentiate
themselves from others in the marketplace.
Fourteen firms were ranked this year in IIs
survey, including five that did not make the list in 2016. The
surveyed firms manage an estimated $357 billion in EMEA
equities and $321 billion of debt tied to the region.
IIs research group also ranked teams based on
industry coverage, countries and regions, and economics and
strategy. Bank of America Merrill Lynch led the rankings in all
In the industry survey, Citi placed second and JPMorgan
ranked third. For countries and regions, Citi was No. 2,
followed by UBS Group in third. And in the economics and
strategy category, JPMorgan and UBS tied for second place.
Mifid II has been a focus of many research firms over the
past year, according to Deborah
Rees, executive director at Exotix Partners, which placed
eighth in the countries and regions category.
The smaller the market, in general, the fewer analysts
competing for the Mifid payment, but there are fewer people who
are going to pay for it, Rees said. With Mifid,
theres going to be less money to go around
The MIFID payment refers to how much money
investment firms will have to allocate for research based on
budgets theyre required to set with clients under the new
Rees noted that Exotix is well positioned because the firm
operates in areas such as Bangladeshi pharmaceuticals, which is
covered by very few analysts.
Hasnain Malik, head of equity research at Exotix, said
emerging market research firms have to juggle Mifid changes
with traditional struggles such as unresponsive companies that
do not yet have public-facing investor relations teams.
These tend to be markets where companies are not that
conversant with capital markets, particularly with equity
analysts, Malik said. There can be a diplomatic
He added that researchers must maintain a distance from
companies so they can accurately assess them, but at the same
time keep a good relationship so their information is
up-to-date. This is important because many companies in
emerging markets are not used to dealing with research
departments, Malik said.
Another struggle for research teams is how unpredictable
many emerging markets can be, according to
Alexander Kornilov, vice president of energy research at
Aton, a Russia-based research firm.
When you analyze the emerging markets, the lack of
stability sticks out, Kornilov said by phone.
Almost every day you can be shocked.
While Citis Jansen agreed, he noted that developed
markets - which are seeing a high rate of political volatility
- arent looking very different these days.
I will tell you that the emerging markets are looking
less risky than what youve got in developed markets right
now, Jansen said. These issues have been facing
emerging markets for a long period of time.
As a result, Jansen noted, analysts in emerging markets are
better positioned to handle political uncertainty. As for what
makes a successful analyst?
From a high level, analysts can be very successful in
three areas, Jansen said. They can be making the
best forecasts and recommendations in the market; they can be
thought leaders in a particular area; or they can have strong
industry relationships within their sector.
Malik agreed, adding that analysts responsible for
undeveloped markets need a lot of confidence.
As the equity analyst covering emerging markets, you
have to be a bit bolder, he said. If youre
right, youll be very right. But if youre wrong,
youll be very wrong.