Thank you for your invitation to have a gentlemanly discussion here.
I start off with some points of agreement. We agree that you are a research analyst with DMG, and your last and most recent printed research report on FerroChina was dated 15 August 2008 calling for a buy. You acknowledged warning people verbally about FerroChina’s potential problems after your 15 August report was issued.
I see your disagreement with me that your report dated 15 August is not considered recent. But that report is not even 2 months old, and most importantly, it’s your most recent report. To me, that’s recent enough. An analyst is not expected to talk or promote his stock day in day out. There is an analyst’s old saying, “an analyst is as good as his last call”. Until you issue an updated report, your DMG clients are right to believe your last and most recent BUY call is still valid.
You warned other people about FRC’s potential problem verbally. Why didn’t you issue an updated report? It’s incorrect for an analyst to call for a BUY in a print media and then issue warning in a verbal form. Your license is issued by MAS – you are supposed to disseminate all information uniformly, and that’s what the print media is for. By issuing verbal warnings to selected preferential people and depriving other people of the same warning, you are in breach of your fiduciary duty and rules of your license.
You also referred to 2 other houses’ reports calling for BUY after your report, and even maintained their price target higher than yours. But you’re supposed to be objective and not influenced by other analysts’ view. Besides, it is very unprofessional to pinpoint your peers’ research. For you information, JPM issued a SELL call at the same time, which you omitted.
JPM issued an interim SELL call on 19 September saying, “We recommend investors to avoid the stock, as it has high gearing, excessive short-term borrowings, heavy working capital and capex requirements in FY08-09, all indicating potential financial liquidity risk.” I am sure you have the same access to management, and same plant visit as JPM’s analyst. What stopped you from issuing an interim report?
As an analyst you are expected to provide TIMELY and OBJECTIVE updates based on SOUND FUNDAMENTAL ANALYSIS on the portfolio of companies you cover. You owe a fiduciary duty to investors and clients of DMG.
Please help us understand the constraints you faced to update DMG clients and investors of your new position? Were you prevented from issuing a downgrade report by DMG, or FerroChina’s management or shareholders? You have to help us remove any doubts about your constraints with clear explanation, only then we can understand your difficulty.
In your report, you relied heavily on ‘management guidance’. Where is your objectivity? You also said you were confident that FCR can service loans based on capex plan. Please address your confidence now.
What's disturbing is that he acknowledged warning people about FRC's potential problem to selected people but not issuing an update to warn all those who read his earlier BUY report.
4 comments:
Dear Tong Jin,
Thank you for your invitation to have a gentlemanly discussion here.
I start off with some points of agreement. We agree that you are a research analyst with DMG, and your last and most recent printed research report on FerroChina was dated 15 August 2008 calling for a buy. You acknowledged warning people verbally about FerroChina’s potential problems after your 15 August report was issued.
I see your disagreement with me that your report dated 15 August is not considered recent. But that report is not even 2 months old, and most importantly, it’s your most recent report. To me, that’s recent enough. An analyst is not expected to talk or promote his stock day in day out. There is an analyst’s old saying, “an analyst is as good as his last call”. Until you issue an updated report, your DMG clients are right to believe your last and most recent BUY call is still valid.
You warned other people about FRC’s potential problem verbally. Why didn’t you issue an updated report? It’s incorrect for an analyst to call for a BUY in a print media and then issue warning in a verbal form. Your license is issued by MAS – you are supposed to disseminate all information uniformly, and that’s what the print media is for. By issuing verbal warnings to selected preferential people and depriving other people of the same warning, you are in breach of your fiduciary duty and rules of your license.
You also referred to 2 other houses’ reports calling for BUY after your report, and even maintained their price target higher than yours. But you’re supposed to be objective and not influenced by other analysts’ view. Besides, it is very unprofessional to pinpoint your peers’ research. For you information, JPM issued a SELL call at the same time, which you omitted.
JPM issued an interim SELL call on 19 September saying, “We recommend investors to avoid the stock, as it has high gearing, excessive short-term borrowings, heavy working capital and capex requirements in FY08-09, all indicating potential financial liquidity risk.” I am sure you have the same access to management, and same plant visit as JPM’s analyst. What stopped you from issuing an interim report?
As an analyst you are expected to provide TIMELY and OBJECTIVE updates based on SOUND FUNDAMENTAL ANALYSIS on the portfolio of companies you cover. You owe a fiduciary duty to investors and clients of DMG.
Please help us understand the constraints you faced to update DMG clients and investors of your new position? Were you prevented from issuing a downgrade report by DMG, or FerroChina’s management or shareholders? You have to help us remove any doubts about your constraints with clear explanation, only then we can understand your difficulty.
In your report, you relied heavily on ‘management guidance’. Where is your objectivity? You also said you were confident that FCR can service loans based on capex plan. Please address your confidence now.
Regards,
Guanyu
Your response is great. Between august and now, 2 months. this guy got no time to rewrite new report? but jp morgan analyst got time.
I bet my friend who lost $200k on ferro will not be amused.
Goldie,
What's disturbing is that he acknowledged warning people about FRC's potential problem to selected people but not issuing an update to warn all those who read his earlier BUY report.
You guys sound like you all lost a lot of $$$ on Ferroochina. OUCH
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