[Asia Economy Reporter Koh Hyung-kwang] Shinpung Pharmaceutical, which showed a sharp rise in the second half of this year, is recently showing a strong upward trend again. This appears to reflect expectations that funds tracking the KOSPI200 index may flow in as it was included in the index.
According to the Korea Exchange on the 29th, Shinpung Pharmaceutical closed at 128,500 won, unchanged from the previous trading day, on the KOSPI market on the 27th. On the previous day, the 26th, it surged nearly 8%. This is interpreted as reflecting expectations that index funds tracking the index will flow in.
On the 25th, the Korea Exchange announced that 10 stocks, including Shinpung Pharmaceutical, Big Hit which was listed last month, and Kiwoom Securities, considered a beneficiary of this year's Donghak Ant Movement, were newly included in the KOSPI200, and 17 stocks including Kakao Games were newly included in the KOSDAQ150.
Shinpung Pharmaceutical began to attract industry attention after receiving approval for Phase 2 clinical trials of the new coronavirus infection (COVID-19) for its existing malaria treatment drug 'Piramex' on May 13. Also, until the World Health Organization (WHO) suspended clinical trials of the malaria treatment drug hydroxychloroquine for safety reasons, it was grouped as a chloroquine-related stock, causing its stock price to rise significantly. Considering that Shinpung Pharmaceutical's stock price was in the 7,000 won range earlier this year, the current stock price has risen about 18 times.
In the securities industry, there are warnings to be cautious about chasing purchases. Shinpung Pharmaceutical's operating profit for the third quarter of this year is about 1.3 billion won, and net profit is about 1 billion won. The stock price rise is largely due to expectations for COVID-19 treatments rather than being based on performance. The price-to-earnings ratio (PER), which divides the stock price by earnings per share, reaches 3,500 times. Choi Jae-won, a researcher at Kiwoom Securities, said, "It is necessary to be somewhat cautious when approaching after the (KOSPI200) stock announcement date," adding, "Excess returns tend to appear more frequently before the announcement date than after."
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