'High-Risk High-Return' Political Theme Stocks, 30% Loss in One Day

Kona I, Webcash, East Aid, and Jinyang Chemical Plunge
Difficult to Predict Theme Stock Prices... Unclear Reasons for Both Rises and Falls

In the domestic stock market, amid an extreme concentration on political theme stocks, some of these stocks have plummeted. The repeated sharp fluctuations without clear reasons are raising concerns about losses among individual investors.

According to the financial investment industry on the 16th, Erkos fell by 19.5% over two days from the 14th to the previous day. This was the result of a flood of sell orders for profit-taking after a 315% surge over six trading days from the 2nd to the 11th.

Erkos, which produces stage-based baby food and toddler side dishes tailored to infant age groups, surged on expectations for measures to address low birth rates. With the early presidential election confirmed, buy orders poured in. The stock price, which was below 8,000 won on the 2nd, surpassed 30,000 won on the 11th. It closed at the upper price limit on four out of six trading days. It was the fastest rising stock among political theme stocks.

Measures to address low birth rates are one of the representative pledges that appear in every election. Former Democratic Party leader Lee Jae-myung announced a "Comprehensive Low Birthrate Countermeasure for the Survival of the Republic of Korea" early last year targeting the 22nd National Assembly election. He promised to spare no support throughout the entire process, including housing, assets, childcare, and work-family balance for newlyweds to raise the birth rate. Although Lee, preparing for the early presidential election, has not yet presented specific pledges related to the low birthrate issue, individual investors have been buying Erkos intensively. Erkos’ stock price soared to 35,900 won on the 14th, after which the mood changed. Profit-taking sell orders flooded in, and the stock plunged for two consecutive days.

Along with Erkos, stocks considered to be related to former leader Lee, such as Kona I, Webcash, Kukon, and CrowdWorks, also plunged the previous day. Kona I and Webcash, which recently surged due to regional currency-related stocks, fell more than 20% the previous day. CrowdWorks, which rose for seven consecutive trading days from the 4th on expectations of fostering the artificial intelligence (AI) industry, dropped 12%. East Aid, which had continued a three-day streak of hitting the upper price limit from the 10th to the 14th, also fell 11% the previous day.

Jinyang Chemical, known as a stock related to Seoul Mayor Oh Se-hoon, plunged to the price limit on the 14th. It also dropped nearly 20% on the 15th. This was the result of individual investors who had boarded the political theme stock exiting en masse after Mayor Oh declared he would not run in the presidential election.

Cases of political theme stocks that surged sharply in a short period and then plunged can be easily found. Among individual investors who prefer high-risk, high-return investments, some inevitably suffer losses immediately after buying rather than making profits. A financial investment industry official explained, "The fear of political theme stocks lies in the unpredictability of stock price volatility," adding, "Unexpected sudden variables such as major shareholder sell-offs or related politicians’ withdrawal announcements emerge."

He continued, "Many also miss the timing to cut losses (stop-loss) due to vague hopes that the stock will rebound sharply the next day and recover losses."