The Financial Supervisory Service (FSS) will enter a full-fledged 'presidential election mode' starting in May. It plans to wrap up current issues such as SAMBU Construction stock manipulation and the Homeplus situation this month and concentrate the personnel invested here into a special task force for political theme stocks to closely examine unfair transaction activities.
The FSS is expected to focus on cracking down on unfair practices, such as raising specific stocks as theme stocks with false information or engaging in front-running transactions. Activities led by certain forces that control the supply and demand of stocks that have surged sharply or invite individuals close to politicians to prop up stock prices will be monitored based on reports.
Political theme stocks generally see inflated prices as they prepare for elections, often experiencing a sharp drop in prices as the election approaches. With early elections slated for June, the aim is to prevent investor losses by addressing the overheating of theme stocks in advance.
According to the Financial Supervisory Service (FSS) on the 24th, the special task force for political theme stocks organized in December of last year will begin to bolster its personnel and start full-scale activities next month.
An FSS senior official noted, 'Until this month, we are focusing our investigative personnel on current issues such as SAMBU Construction stock manipulation and the Homeplus situation,' and added, 'We plan to complete major current issues this month and reinforce this personnel for concentrated response in the special task force.' The Securities and Futures Commission reported on the previous day that it filed a complaint with the prosecution against SAMBU Construction's de facto major shareholder and CEO for violations of prohibited trading actions, while it issued an urgent notice to the prosecution regarding allegations of improper trading by Homeplus management.
The FSS formed a special task force for political theme stocks after the state of emergency arising from the emergency cabinet meeting in December of last year. The task force is intensively cracking down on behaviors that promote specific stocks as political theme stocks by spreading false facts or rumors, or that involve stock picking operators buying recommended stocks in advance and repeatedly inflating stock prices with optimistic information.
However, just because stock prices have fluctuated significantly does not mean they immediately become surveillance targets. An FSS official explained, 'In past elections, we examined whether there was any intervention by speculative forces, but it has been confirmed that many political theme stocks experience price surges due to speculative funds,' adding, 'The intention to artificially inflate stock prices is entirely different from a surge caused by speculative funds.'
For example, just because Sangji Construction's stock price surged as much as 18 times while being linked to a political theme of Lee Jae-myung, a candidate from the Democratic Party of Korea for the presidential primary, does not mean it automatically becomes a surveillance target.
However, it is a different story if there are reports. The FSS explained that it plans to focus on enforcing regulations against unfair practices, such as speculative forces leading to inflated stock prices or corporations intentionally inviting individuals close to influential politicians for the purpose of becoming political theme stocks based on reports.
The FSS has operated a special task force for political theme stocks during the general elections in 2012, where three individuals were indicted for allegedly manipulating the stock prices of political theme stocks with funds worth 100 billion won. In the 19th presidential election in 2017, a corporate representative was also caught disguising individuals related to presidential candidates as company executives to profit from price disparities.
An FSS official stated, 'We advise investors to report any suspicious circumstances, and we do receive reports that are often utilized for enforcement actions.'
According to the Korea Exchange, since December of last year, the stock price volatility of political theme stocks has reached 121.81%, about six times higher than the market average (KOSPI 16.47%, KOSDAQ 24.12%). Political theme stock items are attracting investors based solely on correlations with politicians or expected benefits from policies without any significant performance improvement. As the presidential election approaches, political theme stocks are experiencing deflation of their bubble, leading to repeated investor losses.