[Beginner's Guide to Stock Investing] EcoPro's Stock Price Plummeted 30% in One Month Despite Its Success

Editor's Note[Joorini Guide] is a smart investment guide for ‘Joorini’ (stock + beginner). We will kindly and easily explain stock stories that are unfamiliar to Joorini.

If we were to pick the hottest stock that heated up the stock market this year, it would undoubtedly be ‘Ecopro’.

It is no exaggeration to say that it was the top contributor to the KOSDAQ rise.

The soaring Ecopro stock price has currently dropped by about 30% compared to a month ago.

There are various reasons, but the signal for Ecopro’s stock price decline was a securities firm report issuing the first ‘sell’ rating.

Recently, the Financial Supervisory Service summoned the analyst who issued this report for investigation.

This shows how closely related securities firm reports and stock prices seem to be,

so let’s take a look at the correlation between securities firm reports and stock prices.

What happened to the once thriving Ecopro?

On the most recent trading day, the 12th, Ecopro closed at 544,000 KRW, down 1.09% from the previous trading day.

This is a 33.65% drop compared to the intraday high of 820,000 KRW recorded on April 11.

On the first trading day of this year, January 2, Ecopro was at 103,000 KRW, and it recorded a rise of over 600% until it hit its peak on the 11th of last month.

The brake on Ecopro’s stock price came with the first ‘sell’ rating report from Hana Securities.

Researcher Kim Hyun-soo of Hana Securities downgraded Ecopro’s investment opinion to ‘sell’ and set a target price of 454,000 KRW.

In the Ecopro stock report dated last month on the 12th, Researcher Kim analyzed, “Ecopro is a great company, but the current stock price already reflects much of that greatness,” adding, “While it has stable profit-generating ability and high earnings visibility, the current market capitalization exceeds the expected corporate value in five years.”

The day before this report was released, on April 11, Ecopro reached an intraday high of 820,000 KRW, but immediately after the report came out, the stock price fell more than 20% over two trading days.

Since then, Ecopro has been on a downward path amid a series of negative events such as executives selling shares and Chairman Lee Dong-chae’s court imprisonment.

The impact of securities firm reports on stock prices

Ecopro’s stock price surged sharply in a short period this year, sparking ongoing debates about overheating.

The fact that the stock price plunged sharply due to a single ‘sell’ rating report shows the significant impact securities firm reports have on stock prices.

When Hana Securities’ Researcher Kim Hyun-soo issued a ‘sell’ rating on Ecopro, the Financial Supervisory Service also summoned him for investigation.

This was due to many investor complaints alleging connections with short-selling forces.

Conversely, when securities firms publish reports with positive opinions such as ‘Strong Buy,’ the effect is similar.

In fact, recently, some securities firms like Meritz Securities and Eugene Investment & Securities upgraded their investment opinions on CS Wind to ‘Strong Buy,’ and on the 11th, CS Wind closed up 7%.

Why ‘sell’ reports are rare in domestic securities firms

Issuing a ‘sell’ rating in domestic securities firm reports is unusual.

According to the financial information company FnGuide, among about 10,000 reports published last year, fewer than 10 contained a sell rating.

This is because of the relationship between securities firms and companies.

An industry insider said, “Securities firms are not independent financial institutions but private companies that need to make profits,” adding, “Due to the nature of securities firms that also handle mergers and acquisitions (M&A), initial public offerings (IPO), and other services, the companies covered in reports are potential clients.”

In other words, giving a negative opinion could mean losing future clients.

Because of this, among investors, there is even talk that ‘neutral’ or ‘hold’ ratings should be considered as de facto sell opinions.

The Yeouido stock market lit up on the night of the 27th. Photo by Hyunmin Kim kimhyun81@

Dear Joorini investors,

Sometimes, domestic securities firms’ reports are full of ‘buy’ ratings, making them less trustworthy,

and sometimes, like in the Ecopro case, you might suspect a connection between sell reports and short-selling forces.

Nevertheless, I recommend reading securities firm reports.

Individual investors inevitably have very limited information.

Analysts provide various information that can affect stock prices through their reports, including company analysis, industry and market outlook, and economic forecasts.

However, I advise reading them critically.

Although analysts have easier access to information than individual investors and can provide deeper insights in their specialized fields, predicting the future is another matter altogether.

For reference, most securities firms provide analysts’ reports free of charge.

Some firms offer paid reports, but most can be checked for free on the securities firms’ websites.

Wishing wise investments to all Joorini investors, I will end this article here.

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This article is from [Joorini Guide], published weekly by Asia Economy. We explain stock-related financial news and difficult economic stories in an easy and friendly way so that stock beginners can understand. By subscribing, you can receive articles for free.

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