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Equity research is hot in China, but the pressure is "massive"

China's stock market has been rising rapidly. As a result, investment banks, foreign and local alike, are looking to expand the A-share analysts team to better cover the market. In contrast to Western markets, equity research analysts are one of the hottest properties in town. But what does this job involve? How much does it pay? And what are your career options? One (anonymous) research analyst at a leading securities firm in China gave us the inside story.

Q: What are you main job responsibilities as an A-share analyst?

A: We are sell-side analysts, and our works are mainly doing research and providing service. The purpose of the research is to find out stocks that are worth investing and then recommend to clients. To do this, we need to first sift through a number of companies in the sector potentially worth investing, carrying out some initial researches so as to form our views. After that, we will get into contact with the companies and arrange site visits. Normally it takes two to three site visits before we can write up a research report.

We also need to provide services to our clients. These are mainly shareholders of the listed companies, such as the institutions who have bought the shares upon our recommendation. They want to be in touch with us all the time, obtaining our latest analysis and views about the companies. Sometimes we will also bring the biggest shareholders and the companies' management together so that they can have face-to-face meetings. Just to keep smooth communication between companies and shareholders.

Overall, this job is quite flexible in terms of how long you need to stay in office.

Q: What about the pay? Particularly the pay for juniors?

A: I can only talk about it based on what I know within my own firm. Generally, first year graduate earns a little over RMB200K ($32k, and this goes up to somewhere over 300K the next year. It's hard to say for those who have gained over three years' experience because the disparity will be bigger due to performance. If you do well, you can make 400K or 500K.

This includes bonus, by the way.

There are of course "star analysts", those who have already become well-known in the industry, or those who are on the annual ranking list compiled by the New Fortune magazine. It's hard to say how much they earn. Figures could vary a lot.

Q: What are your possible career paths?

A: Because we are sell-side analysts, so a natural exit route is to move to the buy-side, such as fund managers, or private equity firms. Some people would start to trade for themselves too.

There are people who want to stay on the sell-side. These are mainly those well-known analysts who have already built up a reputation. They are influential in their own sectors, and their opinions carry quite a heavy weight. In short, they are the focus, and they enjoy this kind of status. Just like the ones on the New Fortune ranking list, as I mentioned.

The pay on the sell-side is also higher than buy-side, but it comes with more hard work, as well as greater pressure, given that we face the clients directly. So there are some sell-side analysts moving to buy-side for a better lifestyle, a better work-life-balance.

Apart from that, it's also possible for sell-side analysts to take up jobs as board secretaries in listed companies. But very few people do that. It's not a mainstream choice.

Well, having said all this, it looks like we don't have a lot of viable career options!

Q: How do you feel about being an equity research analyst?

A: The pressure is massive, and I'm constantly feeling it. It is because our performance largely depends on the ratings clients give us. It's a quarterly rating, and our income is closely linked to it. The ratings will also be converted into a ranking that will be shared within my firm, so it's another source of pressure. The ranking in turn decides how much bonus we get. And it could vary hugely depend on the ranking.

We also have pressures on the stock recommendation. If we recommend a wrong stock, clients are definitely unhappy. But if we don't recommend a stock at all, the sales will give us pressure. All these will be reported to the management, and this is where the pressure comes afterwards.

So in short, I feel the most obvious nature of this job is the pressure. It's there all the time. Besides the pressure from performance, there is also pressure from the constantly moving market. In theory, I'm expected to follow very closely all the news that's related to my industry. I can't afford to miss it, or it would be a grave error if I can't offer my views when a client calls. So I have to be at all times vigilant.

Q: How about the workplace culture?

A: My feeling is that the culture issue has been played down a bit. Being analysts, we rely heavily on the platform, and the associated values that it brings to us. The turnover rate among equity analysts are quite high. The common feeling is that we deserve a lot more because we have sacrificed a lot. This is not surprising. But this is a quite small circle, most of us stay in this circle even if we leave our current posts. So colleagues get on well here.

Q: China's stock market has been rising like crazy. Has it made equity analysts more popular?

A: Yes, I truly feel it. It seems all in a sudden there is a shortage of A-share analysts in the market, and everyone starts to get calls from headhunters, including myself. As I just mentioned, moving from sell-side to buy-side is a normal career route to us. Now that the market is robust, buy-side is in need of many more analysts. Plus there are people leaving because they want to trade and invest for themselves. All these lead to a shortage of A-share analysts.

You mentioned some foreign banks are also expanding A-share analysts teams. In fact they tried that a few years ago, but it didn't really lead to anywhere. Why are they doing it again now? Maybe the rapid rise of A-share market has caught their attention again, and they are again feeling necessary to better understand China's stock market?

Q: How long do you think this recruitment drive can last?

A: It should depend on how the stock market goes, as well as the supply and demand. To be frank, it's quite hard for securities firms to properly train new graduates these days. In such a bull market, securities firms need people who are able to make contributions as soon as they arrive, so new graduates don't have the chance to learn and grow.

My firm used to be rather willing to recruit graduates, give them proper training and foster them to become good equity research analysts in a few years' time. But things have changed. We are recruiting experienced analysts too. On the one hand, this deprives young graduates of the chances to grow, and on the other hand, it further exacerbates the imbalance between supply and demand. What we are then left with is what you now see in the market: a big shortage of qualified A-share equity research analyst.

AUTHORThomas Zhang

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