[Opinion] Analysts

Hong Sun-pyo, an analyst at Hanyang Securities, predicted a stock market tumble caused by the U.S. sub-prime mortgage crisis on July 24, when the KOSPI index cracked 2,000 and Korean stock markets were in a state of euphoria. But his reports that said, “The U.S. sub-prime mortgage meltdown will hurt U.S. stock markets and affect Korea, making it hard for Korea to maintain the momentum which help the stock index cross the 2,000 point mark,” did not draw much attention. He was seen as just another skeptic in a rosy market.

It is not easy for analysts to accurately forecast future stock prices. As most analysts work for securities firms, they are inevitably inclined to optimistic views. They present all rosy predictions when stock markets are seen as bullish, saying that the market is “undergoing a correction” only after stock prices drop. They usually grant “buy” ratings easily, saying that the prospects for a particular company are bright. But they rarely say otherwise.

In fact, Korea’s financial crisis in 1997 was actually caused by some 30 analysts at a Western investment bank in Hong Kong who withdrew money from the Korean market. The crisis highlighted the international financial market, making analysts and foreign currency dealers the most coveted job in the country. The favored job of promising young heroes of TV dramas also shifted from company managers who are the sons of founders to analysts or foreign exchange dealers. Later, it became known that those jobs also have the downside: a heavy workload forcing such types to forgo their personal lives and cutthroat competition that can have many facing “retirement at 40.”

Normally, analysts cover corporations or industries. However, the job title also include economists who conduct macroeconomic analyses for domestic and international economies, forecast economic cycles, and predict the big picture for stock markets; financial engineering analysts who plan and manage derivatives; and chartists who specialize in analysis of indicators, such as stock indices. There are a few half-baked analysts in the country’s political circles. The shining examples are those working for Cheong Wa Dae who maintained that the current administration deserves credit for the bullish run of the stock market, when in fact it was just a function of following the global trend. One wonders how they see the recent stock market tumble. They could at least agonize over measures to stabilize the market, since it is doubtful that they would ever admit that they contributed to the problem.

Heo Seung-ho, Editorial Writer, tigera@donga.com