Is TongYang Securities Responsible for the Fall of Hyundai Group's Stock Price?The Financial Supervisory Commission (FSC) is going after TongYang Securities accusing the company of creating false rumors about Hyundai Group's funding problems, but this only appears like the FSC is trying to find a scapegoat to cover up the truth.
On April 25, FSC chairman Lee Yong-keun said that the government would give public funds to Korea Investment Company and Daehan Investment Company, but Hyundai Investment Trust Company would have to take care of their problems on their own.
The day after the remarks were made, Credit Lyonnais Securities released a report to institutional investors. It said since Hyundai Investment Trust Company's main stockholders were Hyundai Electronics and Hyundai Securities, the two companies would be affected and have poor business results this year.
After TongYang Securities saw this report, they added some information of their own, mainly rumors about Hyundai, and placed it on the investment news section of their web site. The news made it's way to private security investment sites, allowing individual investors to read the news.
Despite NASDAQ's jump today, all of Hyundai's affiliated companies fell to their lower limit for the day with TongYang Securities blamed for it. If a company with the influence of TongYang releases false rumors, they should obviously be punished.
The drop in Hyundai stocks was not due to individuals jumping on the selling bandwagon. It was the foreign and institutional investors who chose to sell their Hyundai stocks on the market and they have much more access to information and a better ability to analyze the information than individuals. Individual investors bought a lot of Hyundai stocks during the day.
Even with these facts, the FSC is blaming everything on TongYang Securities and it doesn't look right.
This case brings up another problem. In fact, the news released about Hyundai was nothing new to foreign and institutional investors. Although this information was just a rumor, is it wrong for individual investors to know something that everybody else knows? If there is something wrong, does that mean individuals will always be at a disadvantage in terms of information?
People in the securities industry say that when a prediction on Daewoo's future was released by Nomura Securities last year, the FSC and the press tried to conceal it from the public. They are worred that this case will deepen the differences in the ablity to gather information between individuals and foreign or institutional investors. The industry is wondering what the standard is for a false rumor and real investment news is. It's now the FSC's turn to answer.
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