The Markets Jacques Magliolo
AT last: excellent news for all those analysts who were retrenched between 1990 and 1992.
This week’s announcement that United Kingdom stockbrokers James Capel is to acquire a 51 percent stake in local firm Simpson McKie hails the return of demand for Johannesburg Stock Exchange mining and industrial analysts.
Following the trend that started with Ivor Jones, Roy’s merger with SG Warburg and Davis Borkum Hare’s amalgamation with Smith New Court, the James Capel-Simpson Mckie deal was not unexpected.
However, it does mean that these stockbrokers will have to increase the volume and type of research produced.
At the Simpson McKie news conference, CEO Dixie Strong admitted that in the past overseas stockbrokers were mostly interested in our mining reports. However, with sanctions gone and South Africa opening up to the international community a growing demand for our industrial shares is expected, he says.
Also, he asserts, reports will have to change to include international perspectives and there is a likelihood the firm’s research team would have to be increased.
It is here that stockbroking firms will face a problem. The JSE’s store of skilled and experienced analysts has radically diminished since 1990 and only a handful of rated analysts are left in South Africa.
This is not surprising, given the ruthless downsizing carried out by stockbrokers when the market was in the doldrums in 1990 and 1991.
Secondly, high levels of political and criminal violence before
the April elections convinced many rated analyst to apply for positions in the UK and in Australia.
Those rated analysts who have departed for far-off shores include Frankel Pollak Vinderine’s head of research Peter Davie and coal analyst Kevin Kartun, Davis Borkum Hare’s head of research Manny Pohl. Ivor Jones, Roy lost their economist Graham Bell to UK-based Baring Securities.
So how will stockbrokers re-place and add to their diminishing level of skills?
One tried and trusted method is poaching between broking firms. This can end up in increasing the pay packages of analysts rated the best by institutions to sums of more than R500 000 a year.
But what happens when all the top-rated analysts finally move for better paying positions? Where do stockbrokers go and who do they approach?
There seems to be a tendency to hire who you know. Stockbrokers first look at JSE analysts, then instutional analysts and then — believe it or not — at business journalists.
Whatever happens, analysts are in an enviable position, especially if banks and institutions set up their own exchange.