Merrill Equity Research Expands in Japan

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New York – Amid the ongoing layoffs in the financial industry, Bloomberg reports on Merrill Lynch bucking the trend – at least in Japan:

Feb. 27 (Bloomberg) — Merrill Lynch & Co., the securities firm bought by Bank of America Corp., will expand equity research in Japan as rivals including Goldman Sachs Group Inc. and Citigroup Inc. retrench.

Merrill hired Masaaki Kitami from Deutsche Bank AG last week, increasing headcount at the local equity research team to 23, said Yohei Osade, head of research at Merrill Lynch in Japan. The firm plans to expand coverage 10 percent to 330 Japanese companies this year, he said.

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Merrill aims to start covering the brokerage, non-bank, automobile-part and service industries by June 30, as companies in those industries may be forced to combine both within Japan and internationally to weather the global recession, he said.

The firm hired Mitsumasa Okamoto from Nomura Holdings Inc. as managing director and insurance analyst in July last year. He will cover the securities industry.

Goldman Sachs is trimming its Japan stock research team and Kunihiko Shiohara, co-director of Japan Investment Research, is among employees who will leave the Wall Street firm, two people with knowledge of the matter said this week. Nikko Citigroup Ltd. stopped covering about 40 companies in October and cut 16 positions in its equity research department.

Deutsche Securities Inc., the Japanese brokerage unit of Germany’s biggest bank, has stopped research coverage of Japan’s non-bank financial firms, spokesman Aston Bridgman said yesterday. Masamitsu Ohki, who covered the industry since joining Deutsche Securities in 2002, confirmed separately that he left the company.

As many full-service brokerage firms retrench, some like Merrill may find opportunities to bolster their profile, thereby helping them to grab a larger share of investment banking fees and equity commissions. Although it is quite possible that the overall pool of commissions will decline in coming years, what we may see is a smaller number of investment banks competing for that pool. By laying off equity research analysts in the name of ‘cost-cutting’, many of the weaker firms may be taking themselves out of the game entirely; thereby killing off their chances of recovering their investment banking and equity trading business if and when the market downturn ends.

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