Streaming equity analysts raise watchdog concern

Some equity research analysts have become cybercelebrities who controversially communicate with investors through live video-streaming websites and video-sharing apps, which has raised the eyebrows of China's securities regulator.

The Shanghai and Beijing offices of the China Securities Regulatory Commission have reportedly issued notices to the securities firms under their regulatory jurisdiction, asking them to improve the internal controls over the publication of their research reports through online platforms and instant messaging apps.

The regulator's concern came after a young and attractive female equity analyst named Liao Lei at Founder Securities Co broadcast her research report in a traditional Chinese costume through online video-sharing platform Meipai app on April 7.

The video, although it has already been deleted, became a hit soon after it went online and attracted intense public attention.

The eye-catching way of using online platforms and social media networks to publish reports and communicate with investors have also been copied by other securities firms including Haitong Securities Co Ltd with the intention of gaining greater public exposure.

While it is not officially banned, the securities regulator said in the notice that such practices have caught wide public attention and raised questions over the analysts' professional ethics and expertise, according to media reports.

"Competition among securities firms is intense and it is understandable that some would take advantage of popular online video platforms to promote themselves," said a senior analyst at a major brokerage in Beijing, on condition of anonymity.

The analyst said that his brokerage has yet to receive any instruction or warning from the regulator, but he admitted that there has not been any internal regulation when it comes to using online video platforms and smartphone apps to publish equity research reports.

The development of new online communication tools has broadened the channels for investors to receive market analysis and trading advice.

Some analysts said that the cybercelebrity effect is unlikely to last long as what ultimately matters for securities firms is the quality of their reports and their ability of offer insightful trading ideas.

"The core value of sell-side analysts lies in their ability to help with market pricing. Their value will still be tested by the market," Gao Shanwen, chief economist at Essence Securities Co, wrote in an article.