Bullish calls in tough times carry the day
StarMine winners defy the mood of the moment with aggressive ‘buy’ calls
By EMILYN YAP AND JOYCE HOOI
22 March 2010
Last year’s stock market was not for the faint-hearted. As share prices threatened to hit new lows in the early months, investors pulled out and prayed silently for the financial crisis to end.
It was not a good time to be trumpeting ‘buy’ calls, as some analysts found out. They needed not just strong nerves to go against the bearish tide, but also solid numbers to convince investors. But some went ahead to sound the bullhorn – and were to receive vindication later.
Some of these analysts are getting due recognition from Thomson Reuters’ analysis firm StarMine. StarMine’s annual broker rankings picks out research houses which make the best recommendations and earnings forecasts, as well as analysts who make noteworthy calls. Almost all the analysts highlighted this year (based on the period Jan 1 to Dec 31, 2009) had been bullish about their stocks despite the doom and gloom.
‘There was a lot of disbelief because the general market was negative,’ said CIMB-GK Research analyst Ho Choon Seng, who gave Noble Group an ‘outperform’ rating from March last year. ‘People looked at price movements rather than valuations.’
Daiwa Capital Markets analyst David Lum, who stayed positive on Frasers Centrepoint Trust throughout the year, echoed these sentiments. ‘It was more difficult recommending a buy at that time because there were a lot of cynics. If anyone recommended a buy, we were accused of being too slow to downgrade,’ he said.
The situation was similar for DBS Vickers analyst Ben Santoso. He had changed his rating on First Resources to ‘buy’ from ‘fully valued’ in March. ‘Reversing position is never easy . . . at the time, I had to convince sceptics,’ he said.
Mr. Ho, Mr. Lum and Mr. Santoso were among the analysts who got their calls right when the stock market did a sudden about-turn and shot up in March last year. Rising from a six-year low of 1,456.95 then, the Straits Times Index (STI) has crossed 2,900 since.
Research houses which made it to the StarMine league this year can also wear their badge of honour with pride, knowing that they outdid not just their competitors but also the exceptionally volatile stock market.
CIMB-GK took top spot in the category for recommendations on STI stocks, followed by Macquarie Research Equities and Nomura. When it came to earnings forecasts, UBS was first, and Credit Suisse and Citi came in second and third respectively.
For small and mid caps, recommendations from DBS Vickers did best, followed by those from CIMB-GK and Daiwa Capital Markets. Credit Suisse was first in the category for earnings forecasts, and DBS Vickers and UBS rounded up the top three.
While the stock market has been less temperamental this year, some analysts are not expecting their work to get much easier. There are still many uncertainties – an economy defaulting on its debt, for instance, could trigger another selldown.
It is the bad surprises which can trip up any brave soul. As head of CIMB-GK Research in Singapore Kenneth Ng quipped: ‘People remember you for the bad calls. In a sense, your job is more like the goalkeeper than the striker.’