Equity research analysts at Warsaw-based banks are beginning to tidy up their published stock recommendations on Polish companies, following a Polish Securities and Exchange Commission (KPWiG) resolution released last month.
KPWiG issued a much-praised resolution, although not enforceable by law, strongly suggesting that analysts write research reports more coherently so less financially savvy investors can more easily read and evaluate the sometimes esoteric documents. The commission moved quickly to install the resolution on the heels of research discrepancies in reports about the ITI media group in which analysts evaluated the company's share price differently and offered various price targets that confused investors.
Analysts have taken heed.
"We are planning to adjust our regulations to the (resolution)," said Marcin Materna, an analyst at BIG Bank Gdański.
If analysts, who generally laud the KPWiG motion, choose to comply, they will bear the burden of having to change their research procedures, though they say investors will benefit.
"Some of this requires more work from us, but (it's) good for investors," Materna said.
For one, analysts have been asked to give investors a fuller picture of their research reports by providing them with historical data as to what ratings a bank or its analysts have given the companies in the past.
"You have to put some things that are required in your (research), such as the past six months of ratings," Materna said, adding that this information is particularly valuable to investors who will be able to see how well each analyst predicted stock prices and recommendations in the past, instead of relying only on a single report.
The resolution also requires banks to inform investors if they own shares of or do business with companies they evaluate.
This item is of particular global importance since during the past year a number of high-profile Wall Street analysts, particularly in the tech and telecom sectors, have come under fire for giving overly positive ratings at the behest of bankers who were underwriting the company's stock offerings.
Analysts in Poland said that events in the West also spurred the Warsaw-based commission to proceed with its resolution.
While there will definitely be demonstrable changes in the industry, there still remains the question of how severely business practices will shift, especially since many Western-owned Polish banks have always been under tough scrutiny from their parent firms.
"I hope it will be a big change for the industry," said Mirosław Kachniewski, the KPWiG's spokesman, although he declined to go into detail about the resolution. Jacek Socha, KPWiG's chairman, was unavailable for comment.
The resolution, however, won't have much of an impact on analysts at Citibank-owned Bank Handlowy.
"For us, it is nothing new," said Robert Sobieraj, an analyst at the bank. "Our rules are much tougher than the (ones) in the resolution, but (the resolution) will be important for (other) brokers."
