[REPORTER'S DIARY]Wanted: Analysts With Good Aim

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[REPORTER'S DIARY]Wanted: Analysts With Good Aim

"Why did an earnings forecast for Samsung Electronics Co. come from a university professor? Where are all the analysts?"

Last Friday, investors on the trading floor of a local brokerage house got angry - very angry - after the Korea Stock Exchange closed.

The price of Samsung Electronics shares had held on to its recent gains during morning trading. But it took a plunge in the afternoon after Jung Un-chan, professor of economics at Seoul National University, predicted that the world's largest memory chipmaker would report losses in its semiconductor operations in June.

On that day, the Korea Composite Stock Price Index shed 2 percent to fall below the psychologically important 550-point mark. Samsung shares, which gained 3.4 percent in early trading, finished down by 3.4 percent on the day.

The decline wiped more than 1.9 trillion won ($1.4 billion) off the chipmaker's total market value. The losses were equivalent to the company's first-quarter net profits of 1.2 trillion won plus its estimated net income for the second quarter.

Whether the professor's remark is true will be determined when Samsung Electronics makes a scheduled announcement of its second-quarter results on Friday. Nevertheless, his comment had too big an impact on the stock market to be shrugged off.

Market players complain that they cannot trust stock analysts. There are about 1,000 analysts working for domestic securities firms, and more than 50 of them specialize in analyzing chipmakers.

It is the analysts' job to get a grasp of companies' management situations and forecast their future profitability.

Not one analyst had presented a clear study of Samsung Electronics' chipmaking business.

"Samsung Electronics accounts for 12.5 percent of the aggregate value of the Korea Stock Exchange and has been the major engine of Korea's exports for the past 10 years," said a fund manager for one of the country's biggest investment trust companies, who said he was down billions of won in paper losses for that day.

"Even if the professor was right, share prices would not have tumbled that much if there had been enough warning," he lamented.

Some say that it is too difficult for domestic analysts to come up with accurate analyses because major market-moving factors, including chip prices, are linked to economies overseas such as the United States.

Still, Samsung Electronics and Hynix Semiconductor Inc. have a combined market share of more than 35 percent of the global chip market. It may be hard to be accurate about all industries, but there is an urgent need for expert analysts of the nation's key industries.

One executive of a foreign securities company, known for his skill in investments if not in metaphors, said, "Let's call the national economy the woods and the corporations the trees. What good would it be to talk about the woods when we lack trained specialists to take care of the trees?"

The writer is a reporter of the JoongAng Ilbo.

by Rah Hyun-cheol

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