THE stock exchange operator will start paying for investor research on small and mid-cap companies stocks often ignored by mainstream analysts to boost trading activity for these customers.
The Australian Securities Exchange will pay stockbrokers, investment banks and research houses to publish information about companies with a market capitalisation under $1 billion, which make up 92 per cent of the ASX.
The $1 million year-long trial will create research on chronic underperformers Village Roadshow, Brisconnections Unit Trusts and the Gerry Harvey and Lachlan Murdoch-backed toy company Funtastic.
The ASX says the scheme will give investors a better understanding of listed companies that may not have been covered before, smoothing the way for them to raise money over time. But some industry players note that companies are often not covered for a reason.
Under the scheme, research house Morningstar will compile a "company snapshot report" on almost 1200 companies with a market capitalisation below $50 million. This snapshot, available through the ASX website, will include a share price chart, the company's substantial shareholders and management.
Companies to be covered by Morningstar include Brisbane Broncos, egg company Farm Pride Foods, blinds business Kresta Holdings and women's fashion retailer Noni B.
Meanwhile, brokers and investment banks such as RBS Morgans, UBS and Deutsche Bank will be paid to include companies worth between $50 million and $1 billion in their research for clients. Companies include Freedom Foods Group, Funtastic, AVJennings and PrimeAg.
Andrew Kemp, portfolio manager of the DIGGA Australian Mining Fund, said the 12-month trial "seems like a co-ordinated effort to promote the smaller end of the market to increase participation levels".
David Horsfield, chief executive of Stockbrokers Association of Australia, said the scheme was a positive development.