[Initial Moment] No Sell Reports Available

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[Asia Economy Reporter Junho Hwang] "The investment opinion remains unchanged."

Recently, my stocks keep falling, but the securities firm's report gives a frustrating investment opinion. It says to maintain or hold, sometimes written as "Hold" in English. It's an answer with no solution. Especially for "Joorini" (stock beginners) who plunged into the stock market after becoming "lightning paupers" due to last year's housing price surge and stock market boom, the frustration is even greater. Even if you're not a Joorini, in an era with 40 million securities accounts (as of the 19th), anyone who has seen such reports might have once vented their dissatisfaction, asking, "So, are you telling me to buy or not?"

Understanding the background of the report's creation helps explain the absence of sell recommendations. According to securities firm insiders, reports are a kind of guidebook. If you consider a "listed company" as a "house" and a "securities firm" as a "licensed real estate agent" who charges brokerage fees, then the report can be seen as an investment guidebook. Although commissions are now set at minimum levels, there was a time when they played a significant role in securities firms' revenue. At that time, securities firms issued reports to introduce listed companies to investors, that is, for sales promotion purposes.

In particular, the relationship between listed companies and securities firms can be seen as a kind of master-servant relationship. A significant portion of securities firms' income comes from corporate sales. Also, for securities analysts to grasp information about their assigned stocks as quickly and accurately as possible, they have no choice but to maintain good relations with listed companies. From the listed company's perspective, they would not provide information to analysts who write reports that lower their stock prices. To use a real estate analogy, a homeowner would have no reason to show their house or list it with a real estate agent who points out "there is a leak" or "the window doesn't open." In fact, there are analysts who say they were "shunned at the door" or "cut off contact" by companies after writing sell reports.

For these reasons, it is accurate to say that sell reports do not exist. According to FnGuide, a fund evaluation company, there were no sell reports among domestic securities firms' reports last year. Only 327 reports downgraded investment opinions, but none were sell recommendations. About two brave individuals issued "underweight" opinions, but this was negligible compared to the impact of COVID-19 on the stock market. Most (22,030) maintained their investment opinions as "hold." Even in situations where the government took extraordinary measures such as banning short selling to prevent a stock market collapse, there was not a single report shouting "sell," and some might have preferred not to issue reports at all.

That said, ignoring reports is not a wise approach. The numbers, which are the basis for experts' evaluations of a company's value, certainly have value for investing. Also, if you look at the reason why there are no sell reports from the opposite perspective, it can be considered wise to be more cautious when investing in stocks with few or no reports.

As an additional note, foreign securities firms freely present sell opinions. Foreign securities firms can express sell opinions because they serve as guides for foreign investors. According to the Korea Financial Investment Association, from the end of last year to the present, 13 securities firms have issued sell opinions in about 15% of their total reports. What if domestic securities firms also shouted "sell" like these firms? It might cause immediate disruptions in sales, but trust from domestic and foreign investors would increase. The foundation of investment decisions comes from trust.

This content was produced with the assistance of AI translation services.