‘Lee Myung-bak’ shares nose-dive

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‘Lee Myung-bak’ shares nose-dive

Stock prices of companies expected to benefit from Lee Myung-bak’s election victory tumbled the day after the Grand National Party candidate finally won the presidency.
Ee-wha Construction, a company that could benefit from Lee’s plan to build a canal across the nation, dropped by the daily limit of 15 percent. Its share price shed 4,400 won (4.7 doller) to 24,950 won on the day. Home Center, TSConstruct, Samho Development, Dongshin Engineering and Construction and Sammok Precision and Ind, companies also seen as potential canal beneficiaries, also fell by the daily limit.
The junior Kosdaq, where those companies are listed, dropped 0.9 percent yesterday. All the above-mentioned companies rose by the daily limit on Tuesday, the eve of the election. The local stock markets were closed Wednesday.
Yeo Eun-jung, a researcher at Korea Institute of Finance, said investors sold the shares in bulk to realize trading profits. “Stock prices reflect what value companies will realize in the future. In this case, the so-called Lee Myung-bak shares rose as high as they could before the election,” Yeo said. “With the election over, it is natural for investors to sell them as the value has been realized.”
Yeo said the investment strategy of betting on a political event is very popular among retail investors in Korea. But she said it is not recommended because the actual value of the companies involved have little to do with politics.
During the recent election campaign, the local stock market saw the rise of some companies just because their CEOs are acquainted with Lee. Earlier this year, a false rumor that Lee’s youngest daughter was hired by a brokerage firm lifted the company’s share price. According to the Korea Exchange, during the previous five presidential elections stock prices were less affected by political events than in this one.
Kang Moon-sung, an analyst at Korea Investment and Securities, said politically based investing should give way to more reasonable methods, such as the one used by Warren Buffett, the world’s most renowned investor.
“Investors need to listen to Warren Buffett, who regards fundamentals as the most important factor when investing,” Kang said.


By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]
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