By Yoon Ja-young
Stock shares that are deemed to be connected to specific events or people are drawing the attention of investors, but often the stocks have little or no relation with the actual people or events. Analysts advise that investors focus on the fundamentals of a company instead of speculating on groundless rumors.
The management of Fine DNC, an LCD component manufacturer, was perplexed to see the price of its stock rise fivefold after the Chuseok long weekend. They found out that their company was being considered a “Ban Ki-moon themed stock,” that the shares of its stock were related with U.N. Secretary General Ban Ki-moon. Ban is currently mentioned as one of the possible candidates to run for the presidency next year.
They were bewildered as they had nothing to do with Ban. However, some investors focused on the fact that the company recently gained the interest of Pine Asia Asset, where Ban Ki-ro is serving as CEO. Due to their similar names, a rumor was sparked among stock investors that the CEO is a cousin of the secretary general.
Fine DNC along with a number of other companies in which Pine Asia Asset has invested, such as SC Engineering and Pusan Cast Iron, experienced an irrational jump in their stock prices. It turned out that the two Bans are not related at all, and on that news, the stock prices dropped immediately.
The earthquake that hit Gyeongju, North Gyeongsang Province, last month also led to the jump of so-called “earthquake stocks.” The stock prices of Unison, a renewable energy company, for instance, soared as it was deemed one of the “earthquake stocks” by investors. The company did have an anti-earthquake design business unit, which it turned out to have sold off in 2011.
According to the Korea Exchange (KRX), the country’s stock market operator, 64.4 percent of the stocks that rose to the daily limit at the junior, tech-heavy Kosdaq market last month were “theme stocks,” deemed to be related with presidential candidates or the earthquake.
Politician-themed stocks are common in the market. Other politicians considered to be possible presidential candidates, including former leader of the main opposition Minjoo Party of Korea Moon Jae-in, opposition People’s Party co-founder Ahn Cheol-soo and former Seoul Mayor Oh Se-hoon, also had their own theme stocks with prices fluctuating based on their popularity.
Analysts say that some small investors seem to be betting on the theme stocks, expecting a jackpot in the stagnant market. However, the KRX warns that the prices of theme stocks are often based on groundless rumors, and may be controlled by manipulators who wish to rip off the small investors.
“The theme stocks are often small and cheap so their prices can be easily manipulated by speculators,” an official at the KRX said. “Investors should focus on the core value of a business.”