Today as China’s economy is rising rapidly it is attracting the attention of investment bankers across the globe and with this shift in the balance, the demand for qualified equity researchers and analysts is also increasing.
With Hong Kong being the heart of all commercial activities within China today it is the most important financial center of the world as well.
How to Break into Equity Research in Hong Kong?
Hong Kong offers the best combination of having lower taxes and lower cost of living as compared to US and UK which is attracting not only foreign bankers but also a large number of high profile financiers across the globe.
Apart from this, the number of wealthy people in this part of the globe has increased exponentially and these are the people who are looking out for opportunities and advice on how and where to park/invest their money. This has led to an upsurge in the private and investment banking circles to woo these ultra-rich people in hopes of capturing the market.
Before we explore the different avenues of how you can make your foothold in the HK equity market, let me first explain what is ‘Security/ Equity research’:
In theory, Securities research or analysis is a function within the financial sector of the economy and it deals with stocks and shares of companies. The people who undertake this research professionally are called as either equity researchers or analysts.
There are certain things that you must be aware of before venturing into this profession.
I have organized certain data which will be helpful in understanding the job, its requirement, the pay package, the questions likely to be asked at interviews and some more helpful tips.
Who Are These Researchers?
The basic job of an equity researcher is to investigate, analyse the current financial trends of an organisation or industry to predict how it will fare in the future.
Their basic job involves reviewing financial instruments like stocks, bonds etc. and presenting an impartial report about the financial soundness of a company or entire sector.
Based on the findings presented by the equity researcher investors / clients can take informed decision about either holding or selling their stocks/bonds to book profits.
The designations for a research analyst changes as you grow within an organisation.
From entry-level you can move to becoming a Researcher and thereafter as you start leading a team, depending on the size of the team the designation changes from Associate Manager/VP to Manager then to Senior Manager or VP and finally to MD. The same is depicted in the diagram below.
What Do They Do?
The job of an equity researcher involves analyzing the financial position of a company by carefully studying their annual reports, profits made in the past and in present, future investment projects, future acquisition or merger plans, current liabilities or loans pending, the product mix offered by the company, the annual sales etc.
As an analyst you would be expected to record your findings in a report with details of your analysis, facts, figures, charts etc. so that your clients can take well-informed decision on how to invest their funds.
The biggest chuck of your time and effort would be spent on researching, analysing, and gathering information and the latter in how to present this data, facts, and figures in the report so that it is readable and useful.
Thus the basic job of a researcher is to perform valuation analysis, comparative company analysis, industry research, and provide insight and final analysis to teams and clients.
Where And What Do They Work on?
It is observed that many equity researchers are either working with a financial institutes like commercial banks, investment banks, wealth management firms, insurance companies, mutual fund companies, brokerage firms, securities firms, stock research firm, and other financial organisations.
Although after gaining good experience there are researchers who prefer to work as freelancers whereby they can work independently and copyrighting their research information.
They sell their research to bigger financial organisations for a fee, who then use this information at their discretion.
For a researcher to be successful as a freelancer it is necessary that they work within an organisation for a good number of years to gain experience, build contacts, and learn from mistakes so that the content of the research is rich enough for others to purchase it from you.
However, at the start of your career as an analyst it is best to work with a firm as you will get paid better than freelancing and also enjoy the benefits offered to employees working in large organisations.
How Is the Pay and Life after?
As per the Hong Kong 2014 Salary and Employment Forecast Report published online,the present salary range for an Equity researcher with an experience of 1-3 years is anywhere between HK$ 700-1000 thousand and for a Senior Research Associate with an experience of 3-5 years it is HK$ 900-1400 thousand.
The salary band as per Payscale.com is as shown below for different levels of researchers within a standard organisation structure.
The life for you as an analyst would mean putting 8 hours of work for 5 days a week in your office.
As most of your work involves reading and researching. You will be spending most of your time at your desk either reading or surfing the net for information.
This job does not require a lot of travelling i.e. you would be working at your desk most of the hours in a day.
At an entry-level, the researcher job position are often offered on probation or as temporary jobs for the first 6 to 12 months to evaluate your skills in research and presentation.
A junior analyst’s jobs typically begins as a researcher and then gradually progresses after a couple of successful years towards specialization in either individual company coverage or other specialty area.
What Are the Skill-sets Required?
To enter into this field you would require certain specific educational qualifications along with soft skills. For easy reading, I have listed the same below:
For entry-level position in this profession the minimum expectation is that you should at least have an undergraduate degree in either Finance, economics, or business.
Although having a Bachelors or Maters Degree in any of these disciplines i.e. finance, accounts, business, or commerce is also very helpful.
As there is a high demand for candidates who have cleared level 1 or pursuing level 1 course of CFA, it is recommended that you undertake this course while searching for job opportunities and complete the other levels once employed.
Apart from this you can also take up internship / short-term courses offered at various institutes where you can get the opportunity to get on-the-job training.
The educational qualification along with professional certifications will boost your chances of getting a job at entry-level.
Other Skills to be mastered:
Apart from educational and professional expertise it is extremely crucial to possess certain soft-skills to excel in this field.
For a researcher excellent analytical and presentation skills with respect to building financial models, valuation model, and reports is of utmost importance.
To be able to communicate effectively you must have good command over written and spoken languages like English.
To increase your chances of being hired at any financial firm in HK knowledge of Mandarin/ Cantonese (spoken & written) would be an added advantage.
As a researcher's job requires presenting data in either Word, Excel, and PowerPoint, you must be conversant with working on these applications to create charts, graphs, diagrams etc. for presentation purpose.
Lastly you must be familiar with government laws, regulations, and policies with regards to business operations in the country and know how they affect the existing market trends.
What to Expect in an Interview?
To succeed in an interview there are certain things that you must acquaint yourself with before going to an interview.
The most important thing that you need to do is research the company that you’re being interviewed at, as it is mostly likely that you would be interviewed on the stocks / clients / sectors that the organisation deals in.
I have jotted a few pointers that will help you prepare for your equity researcher job interview:
The first thing you would be most probably be asked is to pitch for a particular stock to a client, it could be to buy, sell, or both.
You may also be required to do this for multiple companies/stocks.
The best approach for handling this question is to keep it short and explain why you would advise on buying or selling the particular stock to a client and present your ideas on what would be the future valuation of that stock.
The idea is to try and keep the discussion concise, crisp, and to the point.
You must also practise on how to create financial modelling structures for stocks, companies, and sector.
Try out as many as you can as this is the other most likely test that is given to analyst at interviews.
Typically the interviewee is asked to create a 3-statement model.
Finally, it is extremely important that you catch up on what is trending and happening not only in the local markets but globally as well.
This information will help you answer question in the interview with more confidence and flair.
Today there is cutthroat competition prevailing in the market for an equity researcher’s job.
You can get the best offers only in large urban cities where the businessmen and investors are always looking for good researchers.
To make your resume visible to employers, ensure that you highlight your educational and other soft-skills in a way that it stands-out from the crowd of other aspiring equity researchers.
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