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Credit Suisse said it is expanding its equity research capabilities in China, adding headcount to meet growing demand for in-depth analysis of the country’s A-share market despite its recent tumultuous past.
An additional six analysts will join the Swiss Bank's research team, covering 180 domestic A-share listed companies that represent more than 70% of China’s CSI-300 index. Credit Suisse plans to increase coverage to 300 companies by the end of 2016, doubling from 130 stocks in November of last year.
The country’s benchmark CSI-300, representing the largest stocks on the Shanghai and Shenzhen exchanges, tumbled by more than a third since hitting a peak in mid-June, but managed to narrow losses, giving up 1.34% on a year-to-date basis.
Among the most notable hires, Li Chen joined the bank this month as a China A-share strategist in Hong Kong, where he will focus on offering bespoke investment ideas to investors. Chen joined the Zurich-headquartered bank from UBS Securities, where he stayed for five years.
Before entering the world of sell-side research, Chen was head of research at Harvest Fund, the second largest mutual fund in China between 2009 and 2010.
He will report to Hong Kong-based Vincent Chan, head of China research.
Li Chen was ranked third in the portfolio strategist category by Institutional Investor and Asiamoney from 2011 to 2014, according to a memo seen by FinanceAsia.
Nicole Yuen, vice-chairman of Greater China and head of Greater China equities, said in the internal statement: “With a gradual opening up of the A-share market, particularly after the launch of Shanghai-Hong Kong Stock Connect, we have seen, and no doubt will continue to see, significant growth in investor interests.”
The stock connect scheme, a mutual market access programme launched in November last year to facilitate limited north- and southbound trading between Hong Kong and Shanghai stock exchanges, was seen by some market participants as part of China's efforts to open its capital account and qualify its domestic stocks for inclusion in the widely-tracked MSCI Emerging Market Index.
Credit Suisse’s revenue in the world’s second-biggest economy shows signs of fatigue, in part due to slowing economic growth.
Its core investment banking revenue in China fell to $79 million on 54 deals so far this year, compared with $186 million on 82 transactions in the same period a year earlier, according to data tracking firm Dealogic. As a consequence, its market share declined to 1.8% this year from last year’s 4.4%, as domestic rival Citic Securities held pole position, increasing its slice of the market to 8.4% from 5.2%.
In the underwriting business, Credit Suisse participated in 19 deals valued at $4 billion in aggregate equity this year, while it raised $2.6 billion for Chinese companies in 17 bond transactions, Dealogic data shows.
On a brighter note, pre-tax income in Asia Pacific, a region investors continue to underpin hopes for growth as it was Chf873 million ($920 million) in the first half of this year, an increase of 101% from Chf435 million for the same period the preceding year. Credit Suisse attributed the rise to increased collaboration between private banking and investment banking units.
“Effective collaboration and alignment between our private banking and investment banking franchises have led to excellent growth in profits in Asia Pacific," said chief executive Tidjane Thiam, who took the helm of Switzerland’s second-largest bank on July 1.
The bank is due to release third quarter results next week.
