[Asia Economy Reporter Hwang Junho] As the ruling and opposition parties confirm their presidential candidates, the securities industry is also seeking beneficiary stocks, accelerating the movement of existing presidential election theme stocks. Experts advise that investing in theme stocks based on weak grounds such as personal connections rather than policy benefit expectations from pledges is risky. Gyeongnam Steel, considered a representative theme stock of Hong Jun-pyo, a member of the People Power Party, is a good example of the harms caused by theme stocks unfolding ahead of the 20th presidential election.
According to the Korea Exchange on the 10th, the closing price of this stock on the 9th was 4,170 won, plunging 77.45% over three trading days from the 5th to the 9th. At the beginning of this year, Gyeongnam Steel’s stock price was only 1,875 won per share. However, as the possibility of Hong’s presidential candidacy was anticipated, the stock price gradually began to rise, soaring to the 5,000 won range after Hong’s presidential candidacy announcement day (the 17th). Subsequently, whenever various opinion polls showed favorable results for Hong, the stock price jumped even more. It even rose to a high of 11,950 won (September 28). The stock price that had risen like this is now being fully returned along with Hong’s defeat in the primary election.
There are numerous stocks following Gyeongnam Steel. Theme stocks for Yoon Seok-youl, the People Power Party’s presidential candidate, include Seoyeon, Seoyeon Top Metal, NE Neungyul, Crown Confectionery, Clean Country, and Deokseong. These stocks were grouped as theme stocks because their CEOs, largest shareholders, or outside directors share the same Pyeong Yoon clan as Yoon or are alumni from the same school.
Despite Yoon’s confirmation as the candidate, investors in these stocks could not simply smile. In the case of Seoyeon, the stock price rose as much as 26.82% intraday to 19,150 won on the 5th when Yoon was confirmed, but it fell for two consecutive days this week, dropping to the 14,000 won range.
The theme stocks of Lee Jae-myung, the Democratic Party candidate, are similar. ATEC TN is called a Lee Jae-myung theme stock because its largest shareholder, CEO Shin Seung-young, is from Seongnam, Gyeonggi Province. TotalSoft and PreMS are also classified as theme stocks because their management are alumni of Lee.
A financial investment industry official said, "(Theme stocks) are often invested in based on stock price fluctuations according to approval ratings rather than the relevance to presidential candidates, and after political events such as the presidential election conclude, stock prices often return or fall further," urging caution in investing.
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