Yoon Seok-yeol's Clan Member, Lee Jae-myung's Friend... Cracking Down on Stock Manipulation in Political Theme Stocks

[Asia Economy Reporter Park So-yeon] As theme stocks fluctuate sharply with every move of major politicians, the Korea Exchange has begun close monitoring. While some theme stocks are based on candidates' and parties' policies, this is to prevent stock price manipulation by market manipulators using rumors such as 'school ties, blood ties, and regional ties.'

[Graphic] = Im Hee-jin

According to the financial investment industry on the 11th, the Korea Exchange is currently conducting detailed monitoring and analysis to prevent price manipulation using political theme stocks.

Lee Seung-beom, head of the Market Surveillance System Department at the Korea Exchange, said, "We conduct continuous monitoring with a dedicated system for all 2,500 stocks, but recently theme stocks have been highly volatile, so we are examining them closely."

He explained, "Not all theme stocks involve unfair trading, but if a specific group of accounts concentrates purchases, it becomes stock price manipulation. We prove this numerically through data analysis of trade execution results."

Although it is difficult for the Korea Exchange to directly investigate rumors circulating on blogs or social media, it detects price manipulation through analysis of trade execution data, which it has monitoring authority over.

Lee said, "For example, if stock A has surged sharply over the past month and the total increase is considered 100%, and 10 specific accounts contributed more than 30% of that increase, it is suspected as price manipulation. In such cases, after detailed review, we notify the Financial Services Commission."

When the Financial Services Commission receives notifications of suspicious accounts from the Korea Exchange, it conducts direct interviews and investigations of the account holders and decides whether to report to the prosecution. It is known that cases of detection for price manipulation are frequent in this process.

Previously, ahead of the 2012 and 2017 presidential elections, the Financial Services Commission, along with the Financial Supervisory Service and the Korea Exchange, formed a task force (TF) to crack down on rampant theme stocks related to major politicians.

There are calls for companies listed as theme stocks to actively disclose information voluntarily, as tightly managed market oversight alone is insufficient. This is because simply being named a theme stock due to alumni or kinship ties causes significant side effects by increasing stock price volatility.

Looking at theme stocks by politician, the main connections are usually school ties, blood ties, and regional ties. Representative examples of theme stocks linked to Yoon Seok-youl, who recently stepped down as Prosecutor General and effectively started political activities, are Seoyeon and Seoyeon Top Metal. They are classified as Yoon Seok-youl theme stocks because an outside director is an alumnus of Seoul National University Law School and a former chief prosecutor at the Seoul Central District Prosecutors' Office. NE Neungyul and Sungbo Chemical were grouped as theme stocks simply because their largest shareholders or CEOs are relatives of former Prosecutor General Yoon.

Theme stocks related to Gyeonggi Province Governor Lee Jae-myung, such as Seongan and TotalSoft, have vice presidents or CEOs who are alumni of Chung-Ang University, the same alma mater as the governor. Similarly, CarrieSoft (Seogang University Graduate School of Media and Communication), known as a theme stock for Park Young-sun, the Democratic Party candidate for the upcoming April Seoul mayoral by-election, and Jinyang Industry and K-Top REITs (Korea University), related to People Power Party candidate Oh Se-hoon, are also connected by school ties.

Sambu Construction, where Lee Gye-yeon, the third younger brother of Democratic Party leader Lee Nak-yeon, was appointed CEO in October last year, showed a sharp rise after Lee's inauguration.

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