Themed stocks take a hitThe presidential race is now in full swing but so-called politically themed stocks are already plummeting after enjoying initial rises.
While liberal candidates Ahn Cheol-soo, an independent, and Moon Jae-in, who is running for the Democratic United Party, are seeing their popularity rise according to recent polls, stocks that have been linked to both men plunged on the local bourse yesterday.
AhnLab, the anti-virus company founded by software mogul Ahn, nosedived by the daily limit of 15 percent to close at 14,900 won ($13.30).
Wooridul Pharmaceutical, linked to Moon, also retreated nearly 15 percent to close at 1,885 won. Moon’s law firm serves as legal counsel for the pharmaceutical company. Its majority shareholder is also the former doctor of the late President Roh Moo-hyun, whom Moon once served as secretary.
Although not as steep, EG, whose chairman, Park Ji-man, is the younger brother of Saenuri hopeful Park Geun-hye, was down more than 7.5 percent from Friday’s trade to close at 49,900 won.
The recent drop in value of stocks linked to the three presidential candidates, including those tied to Park Geun-hye of the ruling Saenuri Party, has raised concern that their bull run may have come to a permanent end.
AhnLab’s price started to fall sharply after Ahn said he would donate his stake if elected. On Friday, he officially resigned as chairman of the board.
“The movements of such politically themed stocks are really difficult to predict, especially since the investments are not made based on the fundamentals, performance or ability of the company, but rather on the back of rumors and speculation,” said an analyst on request of anonymity.
“Additionally, as the race between the candidates is close, this makes it difficult to predict who will win. It seems that interest in such stocks has cooled.”
The analyst added that the recent enhanced monitoring by the financial regulator seems to have also played a hand in diverting hot money to the stocks.
Retail investors have suffered the most from gambling on their continued rise. According to a study by the Financial Supervisory Service (FSS), retail investors have lost roughly 1.6 trillion won in this area in the last year.
The FSS said they suffered by trying to ride the wave at the wrong time, buying stocks when they were already inflated and rushing to offload them after the tide had turned.
The study was carried out on 35 themed stocks between June 2011 and May.
The FSS said the 35 stocks surged by 331 percent on average before retreating. It added that a new burst of 16 themed stocks emerged after May, and their value rose by an average of 172 percent. Retail investors’ losses from the second wave were estimated at 67 billion won.
“Many people lost out by jumping in too late,” said Ha Eun-soo, an FSS official. “Themed stocks are volatile and hard to predict, which makes it difficult for retail investors to turn a profit.”
Many of the 16 companies did not show particularly promising performances in the first place, with an average revenue to operating profit of minus 0.16 percent, while their revenue to net profit stood at negative 1.44 percent.
By Lee Ho-jeong [email@example.com]