By Yoon Ja-young
Analyst reports are supposed to guide investors to make the right decision, but many investors in Seoul doubt the credibility of reports which never tell them to "sell."
The gap between the target prices they suggest and the actual stock prices is also widening.
According to FnGuide, a financial market information provider, many of the shares listed on the Seoul bourse are seeing the gap widening.
For instance, Hyundai Motors has been trading at below 180,000 won, after the controversy over its purchase of land from the Korea Electric Power Corporation in southern Seoul, which cost 10.5 trillion won, and the weakening of the Japanese yen.
However, the average target price suggested by analysts covering the company still hovers above 270,000 won.
Samsung Electronics is no exception. While analysts are suggesting around 1.5 million won as their target price, it has been trading at around 1.1 million won, with its operating profit plunging by 60 percent.
In the case of Daewoo Shipbuilding and Marine Corporation, the stock is traded at around 17,000 won, but the price should double according to analysts, as they suggest 33,891 won as the target price. Samsung Techwin and OCI also had such huge discrepancy. In fact, near half of the 184 stocks whose analyst reports were examined by FnGuide had a target price more than 30 percent higher than the actual price.
The gap may suggest that the stocks are undervalued in the market, but it doesn't seem to be so in Seoul. Analysts are just too reluctant to give negative reports.
Rep. Kim Sang-min of the governing Saenuri Party pointed out in the National Assembly audit of the Financial Services Commission that "sell" reports are extinct here.
"Among the 48,762 analyst reports by the country's top 10 brokerage firms between 2011 and July this year, only three recommend ‘sell," he said.
"Unlike these local companies, foreign securities companies in Seoul constantly issue sell reports. The FSC is overlooking the irregularities," he said.
"Issuing a sell report is like declaring you are going to be an enemy of the company. They won't give you any information from then on," said an analyst who declined to be named. Institutional investors and fund managers holding the stock will also turn their back on the brokerage firm that issued the "sell" report, and the company that was evaluated negatively will exclude the brokerage firm from its deals such as corporate bond issuance.
She said the industry has been interpreting "neutral" or "hold" as "sell" reports. "Unless the power structure changes, I don't think many analysts will have the courage to issue a sell report."
Analyst reports are supposed to guide investors to make the right decision, but many investors in Seoul doubt the credibility of reports which never tell them to "sell."
The gap between the target prices they suggest and the actual stock prices is also widening.
According to FnGuide, a financial market information provider, many of the shares listed on the Seoul bourse are seeing the gap widening.
For instance, Hyundai Motors has been trading at below 180,000 won, after the controversy over its purchase of land from the Korea Electric Power Corporation in southern Seoul, which cost 10.5 trillion won, and the weakening of the Japanese yen.
However, the average target price suggested by analysts covering the company still hovers above 270,000 won.
Samsung Electronics is no exception. While analysts are suggesting around 1.5 million won as their target price, it has been trading at around 1.1 million won, with its operating profit plunging by 60 percent.
In the case of Daewoo Shipbuilding and Marine Corporation, the stock is traded at around 17,000 won, but the price should double according to analysts, as they suggest 33,891 won as the target price. Samsung Techwin and OCI also had such huge discrepancy. In fact, near half of the 184 stocks whose analyst reports were examined by FnGuide had a target price more than 30 percent higher than the actual price.
The gap may suggest that the stocks are undervalued in the market, but it doesn't seem to be so in Seoul. Analysts are just too reluctant to give negative reports.
Rep. Kim Sang-min of the governing Saenuri Party pointed out in the National Assembly audit of the Financial Services Commission that "sell" reports are extinct here.
"Among the 48,762 analyst reports by the country's top 10 brokerage firms between 2011 and July this year, only three recommend ‘sell," he said.
"Unlike these local companies, foreign securities companies in Seoul constantly issue sell reports. The FSC is overlooking the irregularities," he said.
"Issuing a sell report is like declaring you are going to be an enemy of the company. They won't give you any information from then on," said an analyst who declined to be named. Institutional investors and fund managers holding the stock will also turn their back on the brokerage firm that issued the "sell" report, and the company that was evaluated negatively will exclude the brokerage firm from its deals such as corporate bond issuance.
She said the industry has been interpreting "neutral" or "hold" as "sell" reports. "Unless the power structure changes, I don't think many analysts will have the courage to issue a sell report."
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