{"id":2199824,"date":"2023-01-04T08:03:15","date_gmt":"2023-01-04T08:03:15","guid":{"rendered":"https:\/\/www.nknews.org\/koreapro\/?p=2199824"},"modified":"2023-04-05T16:10:25","modified_gmt":"2023-04-05T07:10:25","slug":"how-the-power-dynamics-of-south-korean-finance-distort-stock-valuations","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/01\/how-the-power-dynamics-of-south-korean-finance-distort-stock-valuations\/","title":{"rendered":"How the power dynamics of South Korean finance distort stock value forecasts"},"content":{"rendered":"
For those paying attention to South Korean stock markets, analysts\u2019 forecasts on various KOSPI and KOSDAQ-listed companies might appear overly optimistic, given the absence of positive indicators.\u00a0<\/span><\/p>\n Case in point, a Samsung Securities equity analyst recently published a <\/span>research report<\/span><\/a> about fellow affiliate Samsung Electronics titled \u201cThe Sky is Falling\u201d \u2014 somewhat appropriate, given the recent woes afflicting the semiconductor business of South Korea\u2019s largest corporation. The report noted that lower NAND and DRAM memory prices had dragged the company\u2019s profits.<\/span><\/p>\n But despite the report\u2019s gloomy outlook toward Samsung Electronics\u2019 finances, the authors maintained a target price of $70.88 (90,000 KRW) per share for the company and rated the stock a \u201cbuy.\u201d<\/span><\/p>\n When the report came out on Oct. 28, 2022, Samsung Electronics\u2019 stock prices stood at just under 60,000 KRW per share and very little has changed in the two months since. Considering the general absence of good news on the stock, one must ask why these analysts believe the stock\u2019s value ought to rise by 50%.<\/span><\/p>\n It would be unfair to say that it\u2019s simply a matter of Samsung people liking Samsung. The vast majority of analyst ratings coming out of Yeouido \u2014 Seoul\u2019s financial district \u2014 are positive and have long been that way. <\/span>According<\/span><\/a> to Democratic Party Rep. Lee Jeong-moon, 89% of analyst ratings between 2017-2020 expressed positive calls for their clients to buy. Only 11% of analyst ratings were neutral, and a mere 0.07% were negative calls to sell.<\/span><\/p>\n This phenomenon risks creating a distorted picture of reality that can lead investors astray, and understanding the power dynamics driving these practices can help private investors make better investment decisions.<\/span><\/p>\n