Korea brokers say, ‘Buy, buy, buy!’

A study of reports issued by local brokerages since 2011 showed that fewer than 0.1 percent of the reports had “sell” recommendations compared with around 10 percent in foreign brokerage houses’ reports, according to Saenuri Party lawmaker Kim Sang-min.

Korean brokers fundamentally want customers to buy.

Of nearly 50,000 reports issued by local brokerages since July 2011, reports with sell recommendations numbered only 23.

Neutral opinions numbered 4,801, or 10 percent of the reports. Buy recommendations accounted for 90.3 percent of the total.

By comparison, neutral opinions only accounted for 28.1 percent of foreign brokerage reports and buy recommendations accounted for 62.1 percent.

Securities firms are required to disclose the proportion of their “sell,” “neutral” and “buy” recommendations on the Korea Financial Investment Association’s website, but this has proven to be ineffective in addressing the issue, according to Kim.

Of 7,766 reports issued by local brokerages from January through July of this year, reports with sell recommendations numbered 11, or 0.1 percent of the total. For foreign brokerages, 351 out of 2,509 reports or 14 percent of reports had sell recommendations.

“Distrust of local brokerages and an exodus of retail investors [from the market] will persist if such practices continue,” Kim said.

Kim suggested that a minimum proportion of buy, sell and neutral recommendations should be set by law. This would establish a healthier relationship between corporations, brokerages and asset managers while also giving analysts the freedom to express their true opinions.

“I have pointed out this problem time and time again, and made suggestions to resolve the issue. But both the financial regulator and Korea Financial Investment Association have done little,” Kim said.

“Average retail investors, who need these reports to make investment decisions, are victimized.”

Kim pointed out that even when Daewoo Shipbuilding & Marine Engineering was embroiled in massive hidden losses on their financial books, local brokerages continued to recommend buying its stock in their reports.

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]