This month, 80% of the stocks designated by the Korea Exchange as investment warnings and risks were found to be political theme stocks. Most of these political theme stocks were underperforming small and mid-cap stocks, but their stock price volatility this year reached six times the market average. The overheating of political theme stocks is continuing amid the early presidential election phase, prompting advice to be cautious with investments.
On the 23rd, the Korea Exchange Market Surveillance Committee announced that it will actively monitor political theme stocks during the presidential election period and will strongly respond in cooperation with financial authorities if any unfair trading practices are detected.
According to the exchange, 37 stocks were designated as investment warning and risk stocks this month (from the 1st to the 18th), of which 29 stocks (80%) were political theme stocks. Furthermore, among the 62 stocks that were requested for inquiry disclosure due to significant market fluctuations since December of last year, more than half, totaling 34 stocks, were political theme stocks.
The stock prices of companies linked to political theme stocks fluctuated significantly. The price volatility of the 60 stocks classified as political theme stocks that received investment warnings and risks since December of last year reached 122%. Considering that the KOSPI index's price volatility was 16% and the KOSDAQ index was 24% during the same period, it's clear that the stock prices of political theme stocks experienced dramatic ups and downs.
The exchange designates stocks that show significant price spikes or transaction patterns with potential for unfair trading as investment warning or risk stocks for a period of 10 days. In accordance with these market warning measures, the Korea Exchange may stop transactions on these stocks or impose additional restrictions such as 100% collection of security deposits, prohibition of substitute securities usage, and limitations on credit transactions.
Although political theme stocks had large price movements, upon examining the companies, most of them were listed firms with little investment value. According to the exchange, most companies classified as political theme stocks were small and mid-cap firms with asset and revenue sizes smaller than the market average, and many of them had significantly poor operational performance.
Nevertheless, these stocks experienced drastic price fluctuations based solely on simple connections, such as having the same region or school background as certain politicians or being relatives and acquaintances of listed company officials. The exchange cautioned, "In most cases, this is unrelated to corporate performance or intrinsic value," and warned that, "If the theme disappears due to news or poll results, stock prices could plummet all at once, leading to substantial losses from investments influenced by an overheated environment."
The exchange added, "Refrain from following trades based solely on unverified rumors or vague expectations that lead to spikes in stock prices and transactions."