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Behind those expert talks on stocks

By Hong Liang (China Daily)
Updated: 2009-06-02 07:44

The domestic business press is obsessed with "zhuanjia," or experts of all hues and diverse backgrounds.

Most of them are analysts working at stockbrokerages, banks and various think tanks whose affiliations are seldom specified. There is also an assortment of publicity-hungry college professors and self-styled investment gurus, who are only too eager to dispense free advice to anyone who cares to ask.

Obviously, many investors take their comments seriously. Therefore, it may be assumed that they must have some influence in swaying the market mood. But there is no way to hold these frequent commentators, or the publications that publish their comments, responsible for what they said.

As a business reporter, I learnt a long time ago that readers tend to have short memories. The memory of readers on the mainland seems to be even shorter.

Few people seem to remember that little more than a year ago when the domestic market was on the boil, many analysts and commentators were dancing to the tune of the bull.

I was in Shanghai at that time and had talked to quite a few market "experts." They all sounded the same - upbeat. The market rally, as they all said, was based on rapid economic growth. I thought even the most junior reporter in our Shanghai bureau knew that.

What most "experts" are best at is generalization. An expert may tell you this or that company is a good buy. But when you try to press for more details, he would invariably retreat to the safe haven of generalization, citing known macro-economic factors that can apply just as well to thousands of other companies in many different industries.

When the stock market index was scaling record heights, a few experts did warn about overheating. But their voice was drowned in a sea of euphoria generated by the vast majority of "experts" who professed that the sun of the Chinese capital market would never set.

Surprisingly, the stock market crash in 2008 didn't seem to have in any way undermined the credibility of these undying "optimists." They continued to enjoy the media spotlight while the index was diving to newer depths.

During that time, it was normal to claim that the domestic capital market was moving in line with overseas markets. To be sure, the financial crisis that is dragging the global economy into a recession is having an indirect impact on the domestic capital markets. What has remained largely unexplained is how the massive sell-outs that sent overseas markets into an occasional tailspin could have an immediate effect on the domestic bourses, which have remained mostly closed to direct foreign investment.

An analyst friend in Shanghai confided to me once that his job was subject to many constraints.

Other than meeting the minimum disclosure requirements, the top managements of many mainland corporations seldom feel obliged to discuss with analysts the murky aspects of their transactions, especially those involving inter-group interests. For that reason, it is difficult for stock analysts to confidently assess the real benefits that a merger or an acquisition can bring to the companies involved.

Some stock analysts simply make it a point of never talking to the press. This should not be the case.

Stock analysts can do the investment public a service by drawing attention, through the media, to the many unanswered questions about corporate transactions, and holding corporate executives more accountable for their actions.

E-mail: jamesleung@chinadaily.com.cn