False Information and Rumors Also Punishable as Unfair Practices
The Financial Supervisory Service (FSS) announced on December 3 that it will intensively monitor political theme stocks, which have been experiencing sharp fluctuations since the declaration and lifting of martial law.
On the 23rd, the FSS stated that it will activate a special task force to crack down on unfair trading involving political theme stocks to prevent damage to general investors.
The reason for activating the special task force is the overheating trend observed in political theme stocks related to politicians following the declaration and lifting of martial law. In fact, during the period from December 2 to December 16, the daily fluctuation rate of the political theme stock index ranged from a low of -5.79% to a high of +12.98%, showing volatility much greater than that of the market index.
Regardless of corporate performance, stocks are being classified and traded as theme stocks mainly because executives or major shareholders of companies are connected to influential politicians through blood relations, regional ties, or academic connections.
Comparing the fluctuation rates of political theme stocks and market indices for the fourth quarter (October 2 to December 16), the political theme stock index rose by as much as 47.86%. In contrast, the KOSPI and KOSDAQ indices increased only by up to 2.80% and 2.48%, respectively.
Accordingly, the FSS recommended refraining from follow-up buying of stocks with rapidly rising prices. Political theme stocks are difficult to predict, and their prices can plummet even with minor changes in political situations. The FSS also emphasized that investors should not be misled by unverified information but should base their investments on the company’s financial status, governance, and disclosures.
Furthermore, the FSS requested restraint in producing, distributing, or using false information or rumors. Producing or spreading false information through platforms such as YouTube or Telegram, or using such information, may be punished as unfair trading.
The FSS explained, "If any unfair trading suspicions such as the dissemination of false information or rumors related to political theme stocks are found, we will immediately launch an investigation, conduct a thorough inquiry, and strictly take action under a zero-tolerance policy if illegality is confirmed."
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