Future-proof focus: CFA Capital Market Awards shines light on data-driven approach to equity research analysis

CAL Securities Research Team with (from left) CFA Society Sri Lanka Immediate Past President Dinesh Warusavitharana, Assistant Research Manager Ishara Nilam, CFA Head of Research Trisha Peries, Senior Research Analyst Nilakshi De Mel, Assistant Research Manager Pravir Goonewardene, and CFA Society Sri Lanka and CAL team Director Travis Gomez 

As the 10th annual CFA Capital Market Awards to be held in June draws closer, CFA Society Sri Lanka, as the organisers of the event, deems it pertinent to reflect on the success factors of award winners from the past year.

The award for Best Equity Research Team recognises teams working to develop research as an integral component of investment decision-making, targeting fundamentals-driven, informed, and efficient capital markets, and promoting the provision of high-quality and timely research to all market participants. 

It is one of the five major accolades presented at the CFA Capital Market Awards and was awarded to Capital Alliance Securities (CAL Securities) in 2022, marking the third consecutive year in which the research house secured the honour. In addition, CAL Securities was conferred the title of Best Sector Report at the CFA Capital Market Awards last year.

Commenting on this noteworthy achievement, CAL Group CEO Ajith Fernando says: “Despite the volatile market conditions over the past two years, the equity research team at CAL Securities has continued to provide timely insights to our clients, particularly crucial macroeconomic and sector insights. We are proud to have seen our team win the Best Equity Research Team and Best Sector Report again at the 2022 CFA Capital Market Awards, and believe that it’s a clear indication of the value they bring to our group.” 

In 2022, the primary research focus of CAL Securities was on macroeconomic events, particularly amid the shifts taking place in the political environment, with the information gathered being utilised across the different departments of the company, be it related to equity or fixed income, thereby enabling the firm to better inform clients of the ground realities.

CAL Securities was also able to build on its efforts from the prior year, in relation to disseminating information, with a focus on channels such as instant messaging and short videos to provide educational content to investors.

CAL Securities Head of Research CFA Trisha Peries explains that the company worked on delivering insights that were hitherto unavailable in the market, by implementing internal supply chain and sector checks: “We also launched a series called ‘Ears on the Ground’ to gain perspectives from industry experts, in terms of what was going on with different industries at a particular time.” 

Over the past year, CAL Securities has adopted a data-driven approach in response to volatile market conditions, with a greater emphasis on sensitivity and scenario analysis. Economic Analyst Pramodya Edirisinghe also points out that the company has “mainly used Power BI, Python and other statistical software to build predictive models and automate processes.”

When it comes to sector research, CAL Securities has employed an approach that is based on the market demand, economic conditions and investor sentiment, covering industries where it sees untapped market opportunities or those in which clients have expressed a particular interest.

CAL Securities Associate Amrith Fernando elaborates, “Last year was challenging, in the sense that we had to find more resilient sectors, or sectors that would recover faster compared to the rest. So, the focus of our sector research was different.” 

The company says it did not experience major changes in terms of investor relations (IR), despite the volatile market conditions. Commenting on the IR function, CAL Securities Analyst Dilushka de Mel notes: “It depends on what sort of relationship you have with clients, but in general, most of them are forthcoming with information”. 

Spotlight on CFA Capital Market Awards

A focus on innovation in promoting data and data-driven research, along with new methods of disseminating information to investors, is cited as a decisive factor in CAL Securities securing the awards for Best Equity Research Team and Best Sector Report at the CFA Capital Market Awards last year.

“Last year, there was a lot of innovation in terms of information dissemination, where we published bite sized-content, making it more reader-friendly and catering to the retail market. This year, we are focussing more on data and data-driven approaches, even much more compared to last year,” adds the CAL Securities Head of Research. 

As for incorporating feedback from the Capital Market Awards, she states that starting from the 2022 edition of the awards, CFA has advocated for a greater focus on environmental, social and governance (ESG) reporting, with growing interest from foreign investors as well. 

Peries also asserts that with substantial talent being lost to migration, the CFA Capital Market Awards could help research houses maintain standards, even with the infusion of brand-new talent. She continues: “Amidst the talent migration, CFA Society Sri Lanka has a large role to play, to ensure that new CFA candidates understand the industry opportunities available in the country.”

Despite the impact of new economic conditions in Sri Lanka, as well as inputs from the International Monetary Fund and efforts aimed at debt restructuring, CAL Securities believes that it has a strong foundation in place to continue research work, in particular, data-driven research.

The research firm’s future focus would be on the information that adds value, and using automation and artificial intelligence (AI) to analyse data, which in turn is expected to offer CAL Securities an edge in terms of timely dissemination of research