KRX ups ante on ‘political’ stocks

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KRX ups ante on ‘political’ stocks

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Korea’s financial authorities were poised to issue tougher limits on overheated trading surrounding so-called “politically-themed” stocks yesterday, with related stocks plummeting again following a small rebound the previous day.

With authorities moving to immediately halt the trade of such stocks if their price jumps by an excessive margin for just one or two sessions, analysts said that regulators’ hardline stance is likely to curb the speculative fever surrounding them.

Over the past three days, financial regulators and the local bourse operator appeared locked in a game of one-upmanship, with investors speculating on stocks ostensibly tied to political figures. These politically-charged stocks rose again on Tuesday after plunging on Monday due to the threat of stronger crackdowns issued on Sunday.

Moreover, Korea Exchange (KRX) officials yesterday upped the ante by saying they are considering stopping trades for stocks that show immoderate gains within a short period.

“We are reviewing whether to halt the trading of stocks as soon as the price jump triggers an investors’ warning,” said a KRX official. “Although all stocks would be subject to the new rule, few if any would skyrocket fast enough to trigger it except for these so-called ‘themed’ stocks.”

As of now, the KRX can issue three levels of designations to a stock showing abnormal movements by giving a caution, a warning or by labeling the stock “dangerous.”

Instead of going through all three steps before halting trading, the KRX is considering whether to immediately pull the plug at the warning level.

The news caused some politically-themed stocks, such as data solutions provider BIT Computer and oxidized steel manufacturer EG, to fall by the 15 percent daily trading limit yesterday. They dropped by the same limit on Monday but rebounded by around 2 percent on Tuesday.

“The fact that politically-themed stocks are rising and falling according to government measures suggests the presence of considerable speculation reflected in these stocks,” said Hong Soon-pyo, head of market strategy at Daishin Securities.

“Speculative investments might contract in the short-term, but political issues will continue throughout this year and could lead to more anticipation for these themed stocks in the long term ... though government probes could curb some of the abnormal movement.”


By Lee Jung-yoon [joyce@joongang.co.kr]

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