The Research Firms Navigating a Muted China Reopening

The buy-side once again recognized UBS and CICC as No. 1 in II’s annual ranking of the country’s sell-side research providers.

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Illustration by II

A year ago, China was poised for a resurgence.

It had been three years of strict Covid-19 pandemic lockdown, the country was relaxing its restrictions, and the investment outlook was positive. But 2023 did not live up to expectations for investors, according to China’s top sell-side research firms.

“The past year was challenging for the China equity market,” according to Eric Lin, head of greater China research at UBS Investment Bank. “Expectations were high at the beginning of the year in anticipation of China’s reopening post-pandemic. However, the macro data and corporate earnings in the latter half of the year did not meet up with these expectations.” China fell 13 percent in 2023.

The buy-side navigated the muted reopening by relying on trusted sell-side research firms. For the second year in a row, China International Capital Corp. (CICC) and UBS have both been voted No. 1 in Institutional Investor’s 14th annual All-China Research Team.

This year’s ranking was based on the votes of 2,220 investment professionals across 470 institutions. BofA Securities rose two places to take third, while Huatai Securities and J.P. Morgan Chase placed fourth and fifth, respectively.

Two additional leaderboards were also compiled to represent the views of international and Mainland China voters. The domestic ranking closely mirrored the overall results, with CICC and UBS tying at No. 1. Huatai ranked third, while BofA Securities improved two spots to take fourth. J.P. Morgan rounded out the top five.

International investors appeared to favor global firms, recognizing UBS as the sole No. 1 this year. J.P Morgan moved up to second place followed by BofA Securities in third. CICC and Citi ranked fourth and fifth, respectively.

UBS’s Lin credited his firm’s performance to its local presence in Beijing, Shanghai, Shenzhen, and Hong Kong, which allowed UBS to offer investors timely recovery trackers when China reopened. “UBS Research continues to stay at the forefront with local insights and global perspectives,” he said. “The former is underpinned by our on-the-ground analyst teams at four locations, whereas the latter is an outcome of our global collaborations leading to differentiated APAC Focus research content.”

As for 2024, the current valuation of close to nine times forward price-to-earnings and the MSCI China Index at near two standard deviations below the historical average have investors expecting a benign growth outlook, according to Lin. “However, we see lower global interest rates, improving earnings momentum at listed corporates, and a more accommodative domestic fiscal policy setting to support the equity market,” he concluded.

In addition to the research team survey, II conducted two more rankings in the country focused on sales and corporate access. The twelfth annual All-China Sales Team survey asked respondents to consider six attributes when ranking firms, including the ability to add value to research; idea generation; service and responsiveness; and understanding client needs.

For the ranking of China’s Top Corporate Access Providers, voters were asked to judge firms based on six performance criteria: conferences, logistics, field trips, team quality, roadshows, and virtual events.

Huatai Securities topped both the sales and corporate access rankings, followed by CICC in second. Further down the leaderboard UBS took third and J.P. Morgan fourth. BofA Securities cracked the top five for sales, while Morgan Stanley ranked fifth for corporate access.