[Beginner's Guide to Stock Investing] 8% Drop in KakaoBank on 'Sell' Opinion... Impact of Brokerage Reports on Stock Prices

[Asia Economy Reporter Kwon Jae-hee] One of the issues in our stock market last week was KakaoBank. Unusually, a securities firm issued a 'sell' opinion report, causing KakaoBank's stock price to plunge nearly 8%. You may have seen stock prices rise or fall, or forecasts turn out wrong, based on securities firms' reports. So, what kind of impact do securities firm reports have on stock prices?

◆ The Flower of the Stock Market, What is an Analyst?

You may have heard of the profession called an analyst. An analyst is a professional who provides expert opinions on finance and investment. To do this, they collect and analyze data to present investment opinions and target prices. Of course, sometimes the actual trends differ from predictions, and forecasts may be wrong, but analysts are analysts, not fortune-tellers.

Analysts communicate their thoughts through reports. Stock investors can understand various factors that may affect stock prices, such as companies, industries, markets, and the economy, through analysts' reports.

◆ Why Investors Should Read Securities Firm Reports

Individual investors are inevitably at a disadvantage in the stock market due to information asymmetry. It is not easy to visit companies, and information obtained only through newspapers or news is insufficient. However, securities firm analysts periodically visit companies and have their own areas of expertise such as secondary batteries, semiconductors, and distribution, enabling in-depth analysis and perspective presentation.

Of course, analysts' reports are not always accurate. But we need to know how to utilize these reports. They are one of the in-depth sources of information accessible to individual investors.

◆ The Correlation Between Securities Firm Reports and Stock Prices?

The most recent example of a report affecting stock prices is the aforementioned KakaoBank. On the 29th, KakaoBank closed at 31,100 KRW, down 7.85% from the previous trading day. On that day, institutional investors including foreigners sold about 41 billion KRW worth of KakaoBank shares. This was because DB Financial Investment issued a sell opinion (Underperform) on KakaoBank along with a target price about 20% lower than the current price, at 24,000 KRW, causing investment sentiment to shrink drastically. According to financial information provider FnGuide, this is the first time DB Financial Investment has issued a sell opinion rather than a buy or neutral opinion in its individual stock reports this year.

Researcher Lee Byung-geon of DB Financial Investment said in a report titled "The Gap Between Ideal and Reality," "There is a possibility that KakaoBank will expand platform revenue through its large customer base of 18.61 million," but added, "Considering that it is licensed as a bank, it seems difficult to discover new revenue sources different from existing banks."

There is a saying, "Knowledge is power." Individual investors are at a disadvantage in the stock market not only because of the scale of funds but also due to a severe lack of resources such as time and information. To offset this somewhat, reading securities firm reports can be helpful. This is not to say you should blindly trust the reports. Analysts are not fortune-tellers. However, since analysts invest more time analyzing companies than individual investors, their reports can aid our investment decisions. By frequently reading reports and practicing deep thinking, you will get one step closer to successful investing. We cheer for the successful investments of novice investors today as well.

Editor's Note
[Beginner's Guide to Stocks] is a smart investment guide for 'Joorini (stock + child)' investors. We will kindly and easily explain stock stories unfamiliar to beginners.