[Business & Issues] The Fate of Political Theme Stocks After Dismissal Sentences... Orient Jeonggong Plummets Despite 14-Fold Surge

Sharp Decline Immediately After Impeachment Ruling
First-Tier Hyundai Supplier Unrelated to Politics
Stocks Become Theme Stocks with Any Academic or Regional Ties

Constitutional Court Chief Justice Acting President Moon Hyung-bae and other constitutional justices are delivering the verdict on President Yoon Seok-yeol's impeachment trial on the 4th at the Grand Bench of the Constitutional Court in Jongno-gu, Seoul. Photo by Yonhap News

Political theme stocks that surged sharply this year plummeted immediately after the Constitutional Court's impeachment ruling was announced. Orient Precision, known as the 'Lee Jae-myung theme leader stock,' saw its stock price soar nearly 14 times since the martial law incident in December last year, but on the day of the ruling on the 4th, it fluctuated more than 20% up and down before turning sharply downward as the material faded. Oriental Precision, unrelated to Orient Precision, was also classified as a political theme stock due to its similar name and experienced fluctuations. Investors should be cautious as volatility in political theme stocks may increase for a while after the president's dismissal.

Continued sharp fluctuations before and after impeachment ruling... Stock prices changed by more than 40%

On the 4th, when the Constitutional Court announced the impeachment ruling, Orient Precision's stock price repeatedly surged and plunged throughout the day. The highest price that day was 19,920 KRW, and the lowest was 12,230 KRW, with the stock price continuously moving up and down before closing at 13,170 KRW, down 15.25% from the previous session. Orient Precision's stock price initially rose in the morning session but turned sharply downward immediately after the unanimous decision to dismiss former President Yoon Seok-youl was announced.

Orient Precision is an auto parts manufacturer and a first-tier supplier to Hyundai and Kia Motors. Despite Hyundai and Kia's stock prices stagnating due to the tariff war under the Donald Trump administration in the U.S., the stock price surged 13.74 times from 1,131 KRW on December 3 last year, when the martial law incident occurred, to 15,540 KRW on the 3rd of this month, as it became entangled as a Lee Jae-myung theme stock.

Orient Precision is called the Lee Jae-myung theme leader stock because Lee, the representative, once worked at Orient Watch, an unlisted affiliate of Orient Precision, during his childhood. Another affiliate, Orient Bio, was also linked as a Lee Jae-myung theme stock for the same reason. Lee declared his candidacy for the 19th presidential election in 2017 at the Orient Watch factory. However, there is no direct connection between Orient Precision and Lee, nor is it expected to benefit from his policies.

Most Lee Jae-myung theme stocks, like Orient Precision, are classified as theme stocks without any significant connection to Lee. Another Lee Jae-myung theme stock, Dongshin Construction, was linked because its headquarters are located in Andong, Gyeongsangbuk-do, Lee's hometown. Koiz was called a theme stock because its CEO, Jo Jae-hyung, is known to be an alumnus of Chung-Ang University, the same as Lee.

‘Oriental Precision’ misunderstood as a theme stock due to similar name with Orient Precision

The ship crane of Oriental Jeonggong. Oriental Jeonggong website

There is also a company misunderstood as a political theme stock due to its similar name to Orient Precision. It is Oriental Precision, a manufacturer of shipbuilding equipment. This company holds a 70% market share in the domestic ship crane market and supplies to major domestic shipyards such as HD Hyundai Group, Samsung Heavy Industries, and Hanwha Ocean. It has no relation to the auto parts manufacturer Orient Precision.

Nevertheless, it was entangled as a political theme stock, causing increased stock price volatility whenever political events occurred. However, Oriental Precision is actually a stock expected to benefit greatly from the shipbuilding industry's boom rather than political themes. Investors are optimistic due to projects like the Alaska gas pipeline development under the Donald Trump administration and increased shipbuilding orders from HD Hyundai and Hanwha Ocean.

Most other political theme stocks moved as a group based on academic, regional, or familial ties without real connections to the politicians involved. NE Neungyule, known as a Yoon Seok-youl theme stock, plunged 30% immediately after the dismissal ruling, hitting the lower limit and closing the session there. NE Neungyule was classified as a Yoon Seok-youl theme stock because its parent company, hy (formerly Korea Yakult) Group's chairman Yoon Ho-jung, is a clan member of the Pyeong Yoon family, the same clan as President Yoon Seok-youl.

Political theme stocks thriving amid stagnant domestic market... Caution over increased volatility

On the 4th, the day of the impeachment trial verdict, news related to the impeachment is being broadcast in the dealing room of Hana Bank's headquarters in Jung-gu, Seoul. Photo by Yonhap News

With increasing external uncertainties and the overall sluggish domestic stock market, political theme stocks that surged sharply in the short term are expected to continue experiencing sharp fluctuations during the early presidential election phase. Various unfair trading practices may occur during this process, increasing volatility and requiring cautious investment.

During the impeachment phase of former President Park Geun-hye from January to July 2017, the Financial Supervisory Service operated a special investigation team and detected unfair trading suspicions in 33 stocks. Cases included disguising politically connected individuals as executives, spreading rumors, and manipulating prices to deceive investors. There are concerns that many unfair trades will occur again as the early presidential election phase follows the impeachment crisis.

Concerns are also raised that both domestic political and external environments will significantly increase volatility. Lee Kyung-min, a researcher at Daishin Securities, said, "The U.S. mutual tariffs were announced at a higher level than the market expected, and anxiety has peaked. If improvements are confirmed in the U.S. March Consumer Price Index (CPI) announced on the 10th and the Chinese CPI announced the same day, we expect some relief from the shock."