'Gaptukty' Stocks Without Fail Are 'Political Theme Stocks'

[Asia Economy Reporter Ji Yeon-jin] Most of the stocks that have risen the steepest in the domestic stock market this month are political theme stocks. Theme stocks related to former Prosecutor General Yoon Seok-yeol swept the top four spots.

According to the Korea Exchange on the 27th, the stock with the largest price increase from the beginning of this month until the 26th was NE Neungyul (259.06%). NE Neungyul became a theme stock simply because its largest shareholder, Yoon Ho-jung, chairman of Korea Yakult, shares the same ‘Papyong Yoon’ clan as former Prosecutor General Yoon.

Around the time former Prosecutor General Yoon resigned earlier this month, the stock surged fiercely, and the company issued a public announcement stating, "We inform you that there is no relation between our past and current business and former Prosecutor General Yoon." Nevertheless, the stock has recently been hitting new 52-week highs day after day.

Woongjin also rose sharply by 172.35% during the same period, ranking second, as its chairman Yoon Seok-geum is known to be from the Papyong Yoon clan. Deoksung (159.23%) and Seungil (145.33%) followed. Deoksung was classified as a Yoon Seok-yeol theme stock because CEO Lee Bong-geun and outside director Kim Won-il are alumni of Seoul National University Law School alongside former Prosecutor General Yoon. Seungil also showed a sharp rise as its current CEO is known to be a graduate school alumnus of Yonsei University with Yoon Seok-yeol’s father, Professor Yoon Ki-jung.

The 5th place was Jinyang Industry (141.12%), which surged after Yang Jun-young, vice chairman of Jinyang Holdings, was reported to be an alumnus of Korea University with Seoul mayoral candidate Oh Se-hoon.

Most recently, synthetic leather manufacturer Baeksan attracted attention as a Yoon Seok-yeol theme stock and surged, prompting the Korea Exchange to announce on the 26th that it would designate Baeksan as a short-term overheated stock (single-price trading for 3 trading days). On that day, at the shareholders' meeting, trading volume exploded and the stock price surged because Nam Ki-chun, a lawyer who previously served as special counsel to former Prosecutor General Yoon Seok-yeol, was about to be appointed as an outside director.

Lawyer Nam served as special counsel to former Prosecutor General Yoon during the investigation into the National Intelligence Service’s alleged interference in the 2013 presidential election, when the Supreme Prosecutors’ Office requested disciplinary action from the Ministry of Justice for failure to follow orders. The special counsel participates in the disciplinary hearing process at the Ministry of Justice, providing supplementary statements and submitting evidence.

The two are known to be close friends since university, both being classmates from the Seoul National University Law School class of ’79. Lawyer Nam resigned in January the following year after controversy over ‘excessive investigation’ arose during his tenure as head of the Seoul Western District Prosecutors’ Office in 2010, amid investigations into slush funds of Hanwha and Taekwang groups.

However, political theme stocks tend to plunge after elections, so investors need to be cautious.

In fact, on the 24th, when the opposition unified candidate for Seoul mayor was decided, AhnLab’s stock price rose to 78,400 won in early trading amid rumors that candidate Ahn Cheol-soo would be unified as the People Power Party candidate, but fell to 60,100 won after Oh’s victory was confirmed.

Camus E&C also fell 21.10% on the 23rd and dropped more than 7% on the same day, falling nearly 28% over two days. It was linked as a related stock because Pyo Hak-gil, honorary professor of the Seoul National University Department of Economics and an outside director, served as the executive director of the support group ‘Experts’ Plaza with the People’ during Ahn’s 2017 presidential campaign.

Nam Gil-nam, senior researcher at the Korea Capital Market Institute, said, "Analyzing 70 political theme stocks during the 16th to 19th presidential elections shows that political theme stocks related to both losing and winning candidates experienced relative price declines immediately after election day," adding, "Individual investors need to pay particular attention to this characteristic of political theme stock prices."