Analysts battle listed companies about reports

The conflict between the brokerage industry and listed companies is heating up in the wake of an incident where a listed company was found to have banned an analyst from any future visits after the publication of a sell report that suggested the sale of the company’s stocks.

Jeong Yoo-seok, a Kyobo Securities analyst in charge of its tourism sector, received a notice from the nation’s largest tourism company, Hana Tour, that he will be banned from visiting the company or joining the company’s future investors’ relations sessions.

The analyst lowered the Hana Tour’s suggested per-share price from 200,000 won to 110,000 won in his report, saying that the company’s project to bring in luxury fashion brands to its new inner-city SM Duty Free store in Insa-dong, central Seoul, is being postponed and that the delay is likely to influence the company’s revenue in the future.

Jeong is not the only Korean analyst who has faced such a situation. A report from SK Securities, a brokerage arm of SK Group, was removed from its website on April 1 after a request from its broadcasting arm, SK Broadband. The report noted that CJ Hellovision customers may see service prices rise due to a merger between CJ Hellovision and SK Broadband.

Out of 32 locally-operating brokerage houses, twenty did not publish sell reports last year, according to Kofia data. As the Hana Tour incident broke, outraged researchers at Korea’s 32 brokerage houses jointly published a petition last week calling for the listed companies to guarantee their rights to publish sell reports.

Kim Joon-ho, chairman of the Korea Financial Investment Association (Kofia) Self-regulatory Committee, said at a press conference last Wednesday, “this issue needs public discussion so we can offer diverse information to investors, as their interest has been elevated more than ever since the appearance of new products like individual savings accounts.”

The Financial Supervisory Service (FSS) named this issue one of the top 20 financial reform goals last year, and started addressing the matter by requiring all brokerage firms to open portions of sell reports online every six months. The FSS also expanded education programs on listed companies’ IR officials, saying that investors should be exposed to both sell and buy suggestions. Kim Gyu-rim, a researcher at the Korea Capital Market Institute, says there is no legal ground on which the government can stop a listed company from taking actions to prevent analysts’ research.

“The only thing that the brokerage industry can do is encourage them to behave as companies would overseas,” Kim said. “Global brokers can publish whatever they believe because there is this culture in which listed companies understand they cannot intervene to stop their criticism.”

“But this type of culture no longer exists overseas, and the work of foreign analysts today is of high quality,” Kim added, saying that local brokerage houses and analysts must work on elevating the accuracy of reports.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]