Concerns raised over suspicious Kosdaq rise

While the Kospi, S&P 500 and Shanghai Composite all rose at news that the U.S. Federal Reserve wouldn’t raise interest rates, Seoul’s secondary Kosdaq market actually went the other direction on Thursday.

The cause for the gloom was a single stock: Codes Combine.

Even though during the day the Kosdaq almost broke the 700 barrier, it turned 30 minutes before the market closed to end the day 0.28 percent lower than the previous trade at 691.49.

Codes Combine is a small fashion company that has been posting operating losses for the past four years. In recent months, it even faced the possibility of being de-listed.

But its share values have soared for no apparent reason over the past few days, and suddenly, the struggling company has become a major player on the market.

Codes Combine is currently third-largest by market capitalization on the Kosdaq, behind Celltrion and Kakao.

The stock operator currently suspects possible manipulation by speculators and it is considering an investigation.

The company’s stock was worth just 23,200 won until March 2. As of Tuesday, it had spiked to 151,100 won.

During the first nine trading days of the month, Codes Combine shares rose 551 percent, hitting the upper limit of 30 percent on five of those days.

Its shares tumbled Thursday to hit the lower limit, closing at 98,700 won. Still, when compared to the beginning of the year, the fashion company’s shares are up 325 percent.

“The stock of Codes Combine has outdone the entire Kosdaq index by almost 2 percent compared to the market capitalization on March 2,” Gilbert Choi, an analyst at NH Investment & Securities.

Even the company seems unsure about what’s going on. In a regulatory report, it stressed that there had been no news that might have triggered a spike in share prices.

One of the reasons some are thinking manipulation is because of the limited number of shares on the market, which would make them easier to inflate and subsequently offload.

Of the company’s 37.8 million shares, 99.6 percent are owned by the majority stakeholder or people close to them. This group is banned from doing anything with their holdings until the end of June because of the capital reduction the company sought last year. As a result, only 0.4 percent of the company’s stock - 252,075 shares - can be traded.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]