ASX Guidance Note 8 update: Brave new world!

  • Changes in sell-side equity research have driven reductions in analyst coverage, less frequent publishing and a trend to allocate research to junior staff.
  • Recent revisions to ASX's Guidance Note 8 Continuous Disclosure provides further clarity when managing analyst forecasts and consensus estimates particularly around dealing with stale analyst forecasts.
  • Listed entities to revisit and reflect on their approach to continuous disclosure and any areas for improvement reflecting changing market dynamics.

The pace and magnitude of change in the Australian cash equities business is causing a tectonic shift for sell-side equity research firms. The exponential rise in passive investing, growth in automated trading, recent regulatory changes (MiFID II) and ultimately a reduction in the pool of Australian cash equities revenue are reshaping this brave new world.

For ASX listed entities and their investor relations teams, this change in sell-side equity research has driven reductions in analyst coverage, less frequent publishing and a trend to ‘juniorise’ bulge bracket equity research teams.

It has created complex and unexpected challenges for listed entities when managing sell-side equity research relationships especially when measuring and managing consensus forecasts against internal estimates/earnings guidance. Alongside listed entities, the ASX has been following these developments very closely and the recent revisions to ASX’s Guidance Note 8 Continuous Disclosure provide further clarity when managing analyst forecasts and consensus estimates particularly around dealing with stale analyst forecasts.

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