Watchdog beefs up monitoring of volatile election-themed stocks

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The Financial Supervisory Service and the Korea Exchange announced strengthened joint measures on Friday. The move was prompted by growing equity market volatility, with retail investors suffering losses. Over 70 percent of politics-themed stocks have plunged more than 30 percent from recent highs.

Central to the measures are close market monitoring and penalty enforcement ahead of the upcoming June 3 presidential election.

They will identify signs and attempts of speculative trading triggered by misinformation and disinformation, as well as unusual price swings.

According to the two government bodies, their second working-level meeting took place Friday, to coordinate regulatory measures, including investor protection.

The two agreed to bolster around-the-clock monitoring of politics-themed stocks, especially those with wild swings unrelated to corporate performance or price-sensitive disclosures.

They also plan to crack down on rumors spread via social media and message boards frequented by minority shareholders.

Identified speculative behaviors will be followed by corporate information disclosures, investor warning issuances and designation as high-risk stocks.

They will open investigations into accounts suspected of unfair trading.

The measures come as about 72 percent of 60 politically themed stocks fell more than 30 percent from their recent highs.

A total of 86.9 percent of the stocks are held by retail investors.

As of May 9, the authorities’ data showed that retail investors incurred losses in 42 stocks over the past month.

The two called for investor caution, adding that the highly volatile price movements of the small-cap stocks are more often than not disconnected from corporate fundamentals.

“The politics-themed stocks are extremely vulnerable to steep price crashes,” the FSS said.