Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Reporter's Notebook Korean analysts need freedom of speech
President Moon Jae-in and financial firm CEOs attend the meeting on the Korean New Deal at Cheong Wa Dae in Seoul, Sept. 3. / Joint Press Corps
By Park Jae-hyuk
By Park Jae-hyuk
After the government unveiled its ambitious plan last month to create the New Deal Fund worth 20 trillion won ($17 billion) over the next five years, two reports published by two different securities firms have become worthy of note.
One was written by Hana Financial Investment analyst Choi Chung-uk, who said shareholders would feel tired of the expanded uncertainties surrounding the banks, predicting that financial institutions would have to make up for the potential losses of the fundraising initiative.
The other report's author was Paul Choi, head of Korea research at CLSA, who titled his report “Moon's debut as a fund manager,” saying, “the Korean government is essentially creating interest for the battery, bio, internet and gaming sectors which have already been red-hot even without government support.”
Both of them basically expressed criticism of the government policy, but the fates of their reports were totally different.
While the Hong Kong-based investment bank's report has remained intact despite its author's outspoken comments on the President, the Korean securities firm took down its report, arousing suspicion that Cheong Wa Dae or the financial authorities had forced it do so.
Through an anonymous chat app for verified employees, Blind, some financial firm employees spread rumors that the government gave a warning to Hana Financial Group Chairman Kim Jung-tai and its brokerage arm canceled the employment of new research analysts following the incident.
The financial firm dismissed the rumors as groundless.
Although Rep. Yun Chang-hyun of the main opposition People Power Party asked the Hana Financial Investment analyst to stand before Tuesday's National Assembly audit, he declined to attend, citing personal matters.
The situation has focused attention on the domestic financial industry's long practice of barring analysts from issuing negative reports, particularly on listed firms.
In 2016, HanaTour reportedly threatened to prohibit a Kyobo Securities analyst, who lowered the travel agency's target stock price to 110,000 won from 200,000, from visiting HanaTour offices. In 2015, a Hyundai Department Store executive urged a Taurus Investment & Securities analyst to take down a report that was unfavorable to the retailer.
Although research center heads of the nation's 32 securities firms issued a statement in 2016 and the Financial Supervisory Service came up with guidelines to protect analysts from unfair treatment by listed firms, analysts at local brokerages remain reluctant to make negative comments.
In contrast, foreign brokerages have published negative reports without hesitation, drastically lowering target prices of listed firms.
The CLSA analyst is also known for his criticism of the Moon administration's labor-friendly policies. He defined the country's regulations as “socialist” policies, warning that they could result in an exodus of capital and firms.
Given that Korea guarantees the freedom of speech, analysts at Korean securities firms should also be able to express their negative opinions on listed companies, as well as the government.
If not, similar rumors about the relationship between Cheong Wa Dae and Hana Financial could spread again. This will harm all market participants in the long run, because investors will lose trust not only in analysts, but also in listed firms and the government.