[Inside Chodong] Volatile Theme Stocks... Ineffective Inquiry Disclosure System

Stock Prices Soar on Theme Hype, but "No Important Information" Disclosed
Time to Enhance the Effectiveness of the Inquiry Disclosure System
Some Listed Companies Deny Relevance to the Theme

The stock price of CCS Chungbuk Broadcasting, a comprehensive cable TV operator, surged 375% this month. It closed at 1,109 won at the end of last month but jumped to 5,270 won on the 16th. During this period, it recorded the upper price limit six times. On the 8th, the trading volume exceeded 110 million shares, which is twice the number of CCS's issued shares of 56 million.

As the superconductor theme gained momentum, the stock price volatility of CCS, along with Sinseong Delta Tech, Seonam, Deokseong, and Power Logics, increased. This was driven by news that experimental results of the claimed superconductor material 'PCPOSOS' would be revealed at the American Physical Society annual meeting held on July 4 in Minneapolis, Minnesota, USA, stimulating investor sentiment.

Although the Korea Exchange designated CCS and Sinseong Delta Tech as investment warning stocks, it failed to curb the overheating trend. Speculative funds seeking 'high risk, high return' continue to pour in. In the second half of last year, many individual investors suffered losses due to the superconductor theme's sharp fluctuations. However, the enthusiasm for theme stock investment has become hotter than last year.

The current warning system is insufficient. Improvement of the inquiry disclosure system is necessary. On the 5th, the Korea Exchange requested CCS to disclose information regarding market fluctuations. Although many market participants are aware that stock price volatility increased due to expectations around the superconductor theme, CCS responded the next day that there was no important information to disclose separately.

The inquiry disclosure system is a mechanism by which the Korea Exchange asks listed companies whether they have important information to ensure fair trading and investor protection. Listed companies requested for inquiry disclosure related to stock price fluctuations must respond by the next day. In practice, when stock prices surge riding on theme stocks, most listed companies respond that there is no important information. The financial investment industry points out that the current system has become ineffective because it only requires responses to certain important matters.

Some listed companies voluntarily disclose information that the market is curious about, fearing that innocent victims may occur. Deokseong was requested for inquiry disclosure when its stock price surged in August last year riding the superconductor theme. In its response, it stated, "We recognize that the stock price is fluctuating rapidly recently in relation to superconductor technology, etc.," but also clarified, "Currently, our company is not engaged in any business related to this."

Seonam, which was also requested for inquiry disclosure along with Deokseong, responded, "There is no important information to disclose separately regarding market fluctuations." Through its website, it stated, "It is concerning that Seonam is being focused on as a superconductor-related stock in the recent stock market," and informed, "We have had no research cooperation or business exchanges with any research institution claiming to have developed room-temperature, ambient-pressure superconductors."

When companies disclose information not stipulated in regulations through inquiry disclosure responses and the stock price surge stops or reverses downward, they often receive a flood of complaint calls from individual investors.

Forcing listed companies to voluntarily disclose information when there is no important information and it is not a violation of regulations contradicts the purpose of the inquiry disclosure system. To ensure fair trading and investor protection, it is necessary to enhance the effectiveness of the inquiry disclosure system. This is not a matter to be overlooked. With the general election approaching, political theme stocks may surge. It is time to improve the system so that at least minimal information, including the relevance to the theme, can be provided.