Brokerage analysts urge independence of reports

Analysts at Korean brokerages called for independence of their research reports, following controversy over Hana Tour’s alleged abuse of power against an analyst at Kyobo Securities who wrote a negative report about the company.

Similar controversies have arisen in the past, but it is the first time that analysts have taken direct public action.

“Listed companies can express their criticism of research reports, given that every market participant has different opinions about the growth outlooks and corporate value of listed companies,” chiefs of research centers at local brokerages said in a joint statement last week.

“A sound investment culture will be ensured only when research reports on various viewpoints are released and rational debates and criticisms follow,” they said.

The statement avoided using provocative language but clearly signaled that brokerage analysts were outraged.

In a March 30 research report into Hana Tour, Kyobo analyst Jeong Yu-seok lowered the target stock price of the nation’s largest travel agency, to 110,000 won from 200,000 won, citing its duty-free business’ slow growth outlook. On the day, Hana Tour’s shares plunged 5.19 percent to close at 85,900 won.

Then, an investor relations official at Hana Tour strongly appealed to the Kyobo analyst, and even threatened to ban the analyst from visiting the company for research, according to local news reports.

In a similar case, Hyundai Department Store in June reportedly coerced an analyst at Taurus Investment and Securities to withdraw a report which had a skeptical view on the department’s ambition to enter the duty-free store business. The analysts did not budge, though.

Analyst reports at local securities firms are extremely lopsided toward buy rather than sell recommendations, apparently mindful of backlash from large investors.

According to financial data provider Wise FN, only 0.1 percent or 23 reports expressed sell opinions out of the total of 28,702 reports released from March 2014 to March 2015. Reports with buy recommendations took up 86.6 percent, and those with strong buy, 3.6 percent.

Out of the 23 sell reports, eight came from Hanwha Invetment & Securities and another six from Kiwoom Securities.

By Kim Yoon-mi (yoonmi@heraldcorp.com)