Financial Supervisory Service /Courtesy of FSS

As the political theme stocks experienced rapid fluctuations amid the Dec. 3 state of emergency, the Financial Supervisory Service formed a special investigation team and began concentrated monitoring.

On the 23rd, the FSS noted it would activate a special investigation team to swiftly detect unfair transactions using political theme stocks to prevent losses for general investors. If it uncovers any unfair trading allegations related to false information and rumors about political theme stocks, it will immediately initiate an investigation and take strict measures based on the principle of zero tolerance.

From the 2nd to the 16th of this month, the daily fluctuation rate of the political theme stock index ranged from a low of minus (-) 5.79% to a high of 12.98%. Considering that the KOSPI index fluctuated between -2.78% and 2.43%, this represents a significantly high level of volatility compared to the market.

Broadening the view to the fourth quarter, the KOSPI index has risen 2.80% from October until now, while the political theme stocks have soared 47.68%. The FSS diagnosed that "overheating trends are clearly emerging" and that "investors need to exercise particular caution in this situation."

The reason the FSS is wary of political theme stocks is that, regardless of corporate performance, the prices can fluctuate wildly simply due to a relationship between executives or major shareholders and influential politicians. For example, a recent surge in shares related to Assembly Speaker Woo Won-sik included Kolon Mobility because he attended the same high school as the representative director.

In April, the FSS also conducted a special crackdown on political theme stocks related to the general election. At that time, it was uncovered that an operator of a stock recommendation room had pre-purchased recommended stocks and spread false information linking those stocks to influential politicians. When the stock prices rose, the operator realized a profit and was subsequently reported to the prosecution by the FSS.

The FSS warned, "Political theme stocks are difficult to predict and can plunge dramatically even with minor changes in political circumstances," adding that "pursuing purchases of stocks that have already surged can lead to significant losses."