With less than a month until the presidential election, the frenzy around political theme stocks shows no signs of tapering off. Financial authorities noted that they view the current situation as an overheating of 'political theme stocks' and will actively respond.
The Financial Supervisory Service (FSS) and the Korea Exchange announced on the 14th that an analysis of the recent trading profits of individual investors who invested in political theme stocks as of the 9th found losses in 42 stocks.
The two agencies warned, "When the theme surrounding a specific politician disappears, stock prices can drop in half in an instant, which has actually happened," adding, "The situation of speculative trading is highly concerning for investor losses."
According to the FSS, there are currently 60 stocks categorized as political theme stocks. More than two-thirds of these have seen prices drop more than 30% from their peaks. Considering the trend of stock prices returning to previous levels around the election date, financial authorities believe the current overheating phenomenon is abnormal.
In particular, the proportion of individual investors in political theme stocks is 86.9%, about 20% higher than the overall market individual investor ratio of 66.6%. An analysis of trading profits for individual investors in political theme stocks showed that losses occurred in 42 out of 60 stocks, leading to an increase in investor damage cases.
A notable example is Sangji Construction, linked to the Democratic Party of Korea candidate Lee Jae-myung. The average purchase price for individual investors registered in the Naver Pay asset service for Sangji Construction is 45,524 won. As of 2:53 p.m. on the 14th, Sangji Construction’s stock is trading at 42,000 won. Considering that the average stock price was in the 3,000 won range before being tied to the political theme, this reflects a 14-fold increase in a short period; however, most investors caught in the frenzy of the theme stocks are suffering losses.
The two agencies held a second working-level meeting on the 13th to respond to this situation, about two weeks after the first meeting on the 29th of last month.
In this working-level meeting, the two agencies discussed plans to establish a collaboration system among investigative authorities and strengthen monitoring and preventive measures regarding political theme stocks. They will jointly monitor false rumors creation and dissemination, as well as unusual trading orders, focusing on stocks that show abnormal price fluctuations due to political issues, regardless of corporations' performance and disclosures.
The exchange stated it would actively request preventive measures for political theme stocks to prevent excessive price increases, including designating market alert stocks and requiring inquiries for disclosures. The FSS promised timely investigations and strict measures.
The two agencies said, "Political theme stocks are often inflated beyond their actual value due to rumors and speculative demand, so we urge careful investment judgments," adding, "We hope to receive reports on suspicious transactions, including those involving political theme stocks, to the FSS and the exchange."