General Election D-1, What Is the Fate of Political Theme Stocks?

Investment aiming for a 'One Shot', Beware of Large Losses... Stock Prices Continue to Fall Even After Election Victory

On the 13th, two days before the 21st National Assembly election, an official is monitoring at the Comprehensive Election Situation Room of the Central Election Commission in Gwacheon, Gyeonggi Province.
Gwacheon=Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Geum Bo-ryeong] With the 21st National Assembly election just one day away, attention is focused on the fate of political theme stocks.

According to the Korea Exchange on the 14th, political theme stocks that had been experiencing sharp fluctuations have weakened as the general election approaches after reaching their peak. Namseon Aluminum recorded 4,900 won, down 7.02% (370 won) from the previous closing price. Namseon Aluminum is classified as a theme stock of Lee Nak-yeon, the Democratic Party candidate running in Jongno-gu, Seoul. The stock price of Namseon Aluminum rose about 107.83% in about two weeks, from 3,320 won on the 20th of last month to 6,900 won on the 6th, but then fell 29% in just one week.

Hanchang Paper, a theme stock of Hwang Kyo-ahn, the United Future Party candidate running in the same district as Lee, jumped 124.17% from 1,655 won on the 19th of last month to 3,710 won on the 30th, but fell 38% from its peak to 2,305 won the day before. Ringnet, grouped as a theme stock of Ahn Cheol-soo, leader of the People’s Party, also showed a similar pattern, rising from 2,540 won on the 19th to 5,060 won on the 31st of last month, then dropping back to 4,345 won the day before.

The problem arises after the general election. In the case of political theme stocks, even if the candidate is elected, the stock price may not rise. During the 19th presidential election in 2017, Wooridul Pharmaceutical, classified as a theme stock of President Moon Jae-in, saw its stock price fall 20.78% from 15,400 won the day before the election (May 9) to 12,200 won the day after. Other theme stocks, Kukbo and Barunson, also fell 6.96% and 21.72% respectively during the same period. Theme stocks of Hong Joon-pyo, the Liberty Korea Party candidate who was not elected at the time, such as Duol Industry and Sewoo Global, also dropped 2.14% and 3.62% respectively.

Most theme stocks have little direct relation to the politicians. They are often linked because the company’s CEO is an alumnus of the politician’s school or the company was established in the politician’s electoral district. Nevertheless, it is pointed out that investors’ expectations drive the stock price increases. A securities industry official said, "Political theme stocks are highly volatile, so many investors aim for a 'big hit.' Conversely, when stable stocks lose 1-2%, political theme stocks can hit the lower limit price, causing significant losses, so caution is needed." He advised, "Stocks should be invested in based on future value."

This content was produced with the assistance of AI translation services.