Political Theme Stock 'Risks' Exposed Once Again

Stocks Linked to Hong Joonpyo Plunge After His Retirement Announcement
Jinyang Chemical Tumbles After Oh Sehoon's Decision Not to Run for President
Political Theme Stocks: Difficult to Predict When the Crash Will Come

Many investors who put their money into political theme stocks end up suffering losses rather than making big gains. On April 29, stocks related to former Daegu Mayor Hong Joonpyo and People Power Party lawmaker Ahn Cheolsoo plummeted following the results of the People Power Party's presidential primary. Previously, when Seoul Mayor Oh Sehoon announced he would not run for president, related stocks also declined. Stock market experts have warned that investing in political theme stocks, whose price movements are unpredictable, can result in unexpected losses.

According to the financial investment industry on April 30, individual investors purchased 9.1 billion KRW worth of Kyungnam Steel shares from the beginning of this month up to the previous day. The average purchase price was 7,029 KRW, which, based on the previous day's closing price of 3,355 KRW, resulted in an unrealized loss rate of -52.3%.

Kyungnam Steel joined the ranks of political theme stocks after it became known that Chairman Choi Choongkyung had ties with former Mayor Hong. Kyungnam Steel's stock price has been on an upward trajectory since the '12·3 Martial Law' incident. After dropping to 2,780 KRW on December 3 last year, the stock reached 9,710 KRW on April 8. In just over four months, the share price soared by 249%.

The previous day, Kyungnam Steel's stock price was affected by former Mayor Hong's announcement of retirement from politics. After being eliminated in the second round of the People Power Party's presidential primary, Hong declared, "I will return to private life and live more comfortably," effectively announcing his retirement from politics.

Not only Kyungnam Steel, but also Humax Holdings, Korea Steel Shapes, and Samil saw their stock prices fall. These are listed companies previously associated with former Mayor Hong.

Recently, a speculative frenzy for political theme stocks has swept the domestic stock market. Samryung Mulsan has surged 319.7% so far this month. Other stocks such as 4by4 and Icecream Edu have also risen more than 200%. An increasing number of individual investors are seeking high returns by investing in these rapidly rising theme stocks. However, it is common to see political theme stocks spike briefly and then quickly return to their previous levels. Pyeonghwa Holdings, known as a stock related to former Minister of Employment and Labor Kim Moonsoo, climbed to 16,020 KRW on April 8 but plunged nearly 60% within 15 trading days.

During the same period, Jinyang Chemical, Hyungji Global, and Sunny Electronics also fell by 40% to 60%. Stock prices often change direction suddenly even in the absence of political events that could affect them. An official in the financial investment industry stated, "It is dangerous to think that you can achieve high returns in a short period by investing in political theme stocks," and added, "Only a very small number of investors actually make profits from investing in theme stocks."