Hong Kong-based CLSA Ltd to shutter operations citing competition, costs

CLSA Ltd, the Hong Kong brokerage owned by China's Citic Securities Co, will close its US equity-research operations because of intense competition and declining profit as asset managers built their own research teams and the costs of hiring analysts rose.

CLSA said Monday it will pivot its US domestic equity broking business to focus exclusively on execution and trading services to institutional investors. CLSA is laying off about 90 US-based employees, including well-known banking analyst Mike Mayo.

"Since 2009, CLSA Americas has built an outstanding equity research platform with some of the best analysts on the street. While we succeeded in this regard, the economics of providing US equity research have become increasingly challenged," CLSA Americas CEO Rick Gould said in a statement.

The longstanding practice of paying for research through trading commissions also has been challenged in part by proposed new regulations in Europe that call for investors to pay for research directly.

Simone Wheeler, the global head for communications at CLSA, told Reuters, "It's probably true to say that the decline in payment for equity research had an impact on our business. It wasn't one contributing factor, it was probably many but that was the significant one."

CLSA said it remains committed to its Asian equity business and will continue to provide research to global investors. The company said CLSA Americas has one of the largest Asia-sales teams of any brokerage operating in the US and will continue to offer Asian research and global execution services to US clients.

According to its website, CLSA has 1,500 employees located in 25 cities across Asia, Australia, the Americas and Europe.

Citic acquired a stake in CLSA in 2012 from France's Credit Agricole SA and a year later purchased the rest of the company. It saw the acquisition as a way to improve its overseas business.

Citic, China's biggest broker, was the first Chinese securities firm to purchase a global financial institution.

paulwelitzkin@chinadailyusa.com