A single report from global investment bank Morgan Stanley has sent shockwaves through the South Korean stock market. (Image courtesy of Yonhap)
SEOUL, Sept. 23 (Korea Bizwire) – A single report from global investment bank Morgan Stanley has sent shockwaves through the South Korean stock market, underscoring the outsized influence of foreign financial institutions on the country’s equities.
On September 20, shares of SK Hynix, the world’s second-largest memory chip maker, closed at 157,100 won after plummeting as much as 11.12% the previous day.
This unusual volatility in a blue-chip stock was triggered by Morgan Stanley’s September 15 report that slashed SK Hynix’s target price by more than half, from 260,000 won to 120,000 won.
The report, released during a holiday in South Korea, cited concerns over declining DRAM prices due to weakening smartphone and PC demand, as well as an oversupply in high-bandwidth memory.
Morgan Stanley also lowered its target price for market leader Samsung Electronics, contributing to a broader decline in the KOSPI index.
This incident has highlighted the disproportionate impact of foreign analysts on South Korea’s stock market.
According to financial data provider FnGuide, while domestic securities firms issued only three “sell” recommendations out of 13,076 reports this year (a mere 0.02%), foreign brokerages typically maintain over 10% “sell” ratings.
“The absence of critical analysis from domestic firms has led to an overreliance on foreign reports,” said Kim Sung-hwan, an economics professor at Seoul National University. “This creates a vulnerability in our market to external perspectives, whether accurate or not.”
The situation has taken a more serious turn as allegations of potential insider trading have surfaced. On September 13, two days before the report’s release, Morgan Stanley’s Seoul branch reportedly sold over 1 million shares of SK Hynix.
In response, South Korea’s Financial Supervisory Service has launched an investigation into possible violations of the country’s capital market laws.
These laws prohibit trading based on material non-public information from the time a report’s publication is confirmed until 24 hours after its release.
M. H. Lee (mhlee@koreabizwire.com)
