25 March 2019
Chris Lee (inset, standing), the CFO of Pax Global Technology, has made it clear that he is not happy with a Macquarie report that put an 'underperform' rating on his firm's stock. Photos: EJ Insight
Chris Lee (inset, standing), the CFO of Pax Global Technology, has made it clear that he is not happy with a Macquarie report that put an 'underperform' rating on his firm's stock. Photos: EJ Insight

Shoot the analysts – if you dare

Should you listen to your critics or show them the door? 

Let’s talk specifically about company managements and the pesky analysts from brokerage firms and investment banks.  

Corporate honchos would no doubt like to shut out anyone raising too many questions about their businesses or put out negative research reports. 

But the savvier and wiser among the executives would realize that blacklisting moves could backfire.

If you bar an analyst from a news briefing or prevent him from joining a conference call, it will only create more negative publicity for your company.

The analyst, meanwhile, will enjoy higher profile as people will be more curious about his research reports and stock calls.

Sadly, this appears to be a lesson that some senior managers of our listed firms are yet to learn. 

Take the case of Chris Lee, the chief financial officer of online payment service provider Pax Global Technology (00327.HK).

Over the past two days, investment circles in Hong Kong have been abuzz with chatter about Lee’s vindictive attitude toward an analyst working for Macquarie. 

A video doing the rounds shows Lee asking analyst Timothy Lam to leave the room as Pax Global was conducting a post-results briefing.

The CFO was seen questioning as to why Lam was there despite not being invited for the event.

“If he doesn’t go out, I am not going to present anything,” Lee is heard saying, uttering the word “out” four times within a span of 30 seconds.

“Out, you don’t have the right to stay here.” 

Now, why has Lam been targeted?

Well, the analyst had put out an unfavorable report on Pax Global earlier this year, rating the stock as “underperform”.

The call was made on April 15 when Pax Global shares were being quoted at HK$7.18.

Lam merely did his job by calling a top for the stock, which is currently changing hands at around HK$6.50.

Lee’s public outburst against the analyst has shocked people in Hong Kong’s financial and investment community. 

Also, the behavior is a bit ironical, given that Lee was voted the Asia’s Best CFO (Technology/ hardware) a month ago by Institutional Investor magazine.

Corporate executives tend to have mixed, and often uneasy, relationships with analysts (also, the same case with journalists).

Company owners and top managers seek cheerleaders for their firms. Analysts who are deemed sympathetic are provided access and exclusive information, while those taking a critical view could get shunned.

Some executives take umbrage that analysts tell them how they can run the businesses better, like selling a certain non-performing asset.

Analysts can, and do, go wrong many times in their reports and stock calls, but investors still place a lot of value on the recommendations.

This is something that riles company managements and leads to frosty ties with analysts.

Coming back to the Pax Global case, we can only speculate as to why Lee couldn’t contain his anger over Lam.

But insulting of analysts is not something new in Hong Kong.

The city’s former leader Donald Tsang, for instance, once labeled some analysts as “second-rate”.

In another example, CK Hutchison group managing director Canning Fok had a tense time with Citibank as he felt the US group failed to appreciate Hutchison’s wisdom in investing in 3G a decade ago.

Analysts who made contrarian calls have prevailed in many instances.

Among those is UBS analyst Spencer Leung, who took a long-term bearish view on Li & Fung. Leung was proved correct as the blue-chip trading house saw its stock drift to new lows in the past three years.

Still, for many get it right and are treated like kings by their bosses and investors, there are also others who go wrong and have to swallow their pride.

Analysts who covered Want Want China can recall how embarrassing it was when company bosses gave a Powerpoint presentation that outlined how market forecasts had been wide off the mark.

Also, someone covering China National Building Material may perhaps recall how chairman Song Zhiping responded to a question from a foreign brokerage analyst who put a “sell” recommendation.

“I do not understand what you are talking about. Are you speaking Cantonese or Putonghua? If you are free, come more often to China, learn better Mandarin and visit our factory,” Song said.

Who says analysts have cushy jobs?

– Contact us at [email protected]


EJ Insight writer

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