The case for independent research

IN Malaysia, issuing a “buy” or “sell” report on stocks with a target price requires a licence from the Securities Commissions.

The licence, known as the Investment Advice licence, is more commonly referred to as sell-side research.

In order to obtain this licence, a company must apply to the regulator and meet strict conditions, such as employing research analysts with industry experience and holding a Capital Markets Services Representative’s Licence.

This is what differentiates licensed research analysts from unlicensed “gurus” or so-called market experts.

Many fund managers start their careers as sell-side research analysts before gradually moving to the buy side in fund management.

The career path of a sell-side research analyst is quite arduous.

Strict requirements cover academic qualifications, financial aptitude, and the ability to write well.

Excelling in both numbers and writing is no mean feat, which is why true all-rounder research analysts are rare.

Most research houses are tied to brokerage businesses or operate as part of an investment bank.

They issue “buy” or “sell” reports on stocks, which are then made available to the brokerage’s clients.

If clients act on these ideas, it can spur trading activity and vice versa.

Influence of research reports

Before the age of social media, research reports were extremely valuable to investors.

Which company to invest in, which sector to look at, and which management team to trust – these were all important information that could be obtained from well-prepared research reports.

Back in Malaysia’s roaring 1990s stock market, everyone wanted a piece of this information.

But information didn’t flow as freely as it does today, so many investors relied on remisiers for “tips”.

Imagine if you have access to well-written sell-side research reports, wouldn’t it have made a difference to your investment decisions?

That was the influence such reports wielded at the time.

Today, the majority of research reports in our country have a “buy” call with a high target price.

The rationale is simple: brokers and investment banks want reports that help clients make money.

Issuing a “sell” call can be risky – it might offend existing or potential clients, attract boycotts from company management, or even result in legal letters and personal threats.

Negative coverage simply isn’t worth the hassle for many analysts, whose role is to foster capital market vibrancy.

This makes research analysts who dare to be contrarian – or who challenge herd mentality – all the more valuable. They are few and far between.

When a report deviates from the norm, it usually means either the financial modelling is out of whack or the investment thesis warrants a second look.

Either way, it is to the benefit of the investment community to have analysts who offer a different viewpoint.

Rise of Hindenburg Research

One of the most well-known independent research firms in the United States was Hindenburg Research, founded by Nathan Anderson.

Firstly, it was not bank- or brokerage-backed research, which made Hindenburg’s reports highly trusted.

Secondly, the firm focused on exposing frauds via forensic financial investigations and calling a “sell” rather than a “buy”, which made it popular in a market where short selling was widely accepted.

Thirdly, many of the “sell” reports produced by Hindenburg were accurate, highlighting problems in listed companies long before investors noticed them.

A notable example was Nikola Corp, the electric truck manufacturer.

Hindenburg’s thorough analysis revealed that a promotional video showing a “game-changing” truck in action was staged – the truck was simply being pulled down a slope, with no drivetrain or engine propulsion.

Following the report, Nikola’s share price collapsed from a peak valuation of US$30bil to eventual bankruptcy.

Although most of Hindenburg’s “sell” reports targeted smaller listed companies, it also took on corporate giants and billionaires, including Carl Icahn and Gautam Adani, holding both companies and individuals accountable.

Over 100 individuals were charged civilly or criminally by regulators, in part due to Hindenburg’s efforts.

Unfortunately, the founder decided to shut down the firm in 2025.

The Wall Street Journal called him the “Pre-Eminent Short Seller”.

In a rather touching farewell note, Anderson reflected on the personal challenges he faced and expressed a sense of fulfillment for the work accomplished through Hindenburg.

It was an inspiring endeavour, particularly considering the ethical and moral lapses often seen in capital markets.

Independence builds reputation

Closer to home, the pioneer of independent research in Malaysia is Dynaquest Sdn Bhd, founded by Dr Neoh Soon Kean.

His firm holds the country’s first Investment Advice licence, and being a prolific investor with amazing track record, his research reports have always been highly sought after.

Another independent investment advice firm ahead of its time was MalaysianStreet.com, founded by renown fund manager Yeoh Keat Seng and prominent investor Wong Yee Hui.

The firm adopted a digital approach to distribute research reports to the “man on the street”, giving retail investors access to institutional-quality insights.

Both founders remain active in the market today, continuing their remarkable investment track records.

Many may not know this but before I started Tradeview Capital, I had long wanted to create an independent research house modelled after both Dynaquest and MalaysiaStreet.com – one that was not beholden to brokerage houses or investment banks.

I recognised the value of producing truly independent research for retail investors, free from top-management pressure or business-driven compromises.

The only way to achieve this was if the company was self-sufficient and financially independent.

That’s why I reversed the usual order by getting a fund management licence first and building up our fund business, before setting up Tradeview Research two years later.

Today, Tradeview Research is a recipient of the Bursa Rise+ Scheme contract – an initiative funded by the Capital Markets Development Fund to advance Malaysia’s capital markets.

This allows our firm to produce independent research reports. I can state here, unequivocally, our analysts have full autonomy in producing reports.

I only learn about a research report’s contents upon publication, through our compliance team.

The reason is simple. I believe independence builds reputation.

And with reputation comes recognition and, eventually, remuneration.