They share office space, keep a tight rein on budgets and are as likely to meet their clients in a modest Pacific Coffee outlet in Hong Kong than they are over afternoon tea at the Mandarin Oriental, but independent analysts are becoming a force to be reckoned with.

The independent research industry is well established in the West thanks to rules introduced in the US in the past 10 years or so aimed at ending conflicts of interest between banks and analysts.

These independent analysts are starting to emerge in Asia too and in Hong Kong Asia Briefing attended Asia's independent research summit at the Ritz-Carlton, which featured some of the biggest names in the independent analysis sector.

A growing number of analysts are setting up independent research bodies, selling knowledge and expertise picking shares, as investment banks have cut back on research departments following the global financial crisis.

Sell recommendations
It is refreshing to hear the sheer number of "sell" recommendations emanating from the ranks of these analysts, and there is an absence of fear about defying conventional wisdom when judging the bigger picture.

Gillem Tulloch, founder and managing director of Forensic Asia, who was on a panel chaired by this correspondent looking at China's debt time bomb, argued that China needed to rein in credit, and said that a recession was inevitable, indeed desirable, if China is to continue to thrive.

This kind of bearish comment would be tougher to sustain in an investment bank whose fortunes are deeply entwined with that of the world’s second largest economy.

On the panel, which also included Ben Schmittzehe of Schmittzehe & Partners, Paul Schulte of Schulte Research and Tim Summers of XTE China, there were wildly divergent opinions about the whole question of whether China had a debt problem at all.

Research units at banks have been hit hard by the economic slowdown, and this led to swelling ranks of disillusioned analysts.

Schulte, who previously worked for Nomura, ING Baring, Lehman and China Construction Bank, is loving his independence.

“We are in a very different world…in the last four years, if you don’t see that the research game in investment banks is over then you are just a fool,” he said in an interview with Reuters.

“When you are inside an institution there are fundamental conflicts of interest. Let’s not pretend there is any independence going on whatsoever. Some people just don’t feel comfortable anymore working for financial institutions,” said Schulte.

These days he is unafraid to make a lot more sell recommendations than he ever did working for banks. Nearly half of his calls are “sells” right now as compared to less than a tenth that the teams he led at banks regularly issued.

Commissions paid to the independent research industry in Asia have risen by 40 per cent to around €150 million since 2009, according to the consultants Integrity Research Associates.