[The Editors' Verdict] Coordinated Pressure and the Balloon Effect

Stock Prices Fall for Nongshim Amid Pressure to Raise Ramen Prices
Widespread Confusion Among Examinees Due to Policy to Exclude Killer Questions

On the 30th, the "Partial Amendment to the Act on Capital Markets and Financial Investment Business" passed the plenary session of the National Assembly. It established grounds not only for criminal punishment but also for strong economic sanctions against the three major unfair trading practices in the capital market: stock price manipulation, insider trading, and fraudulent transactions.

However, despite strong public opinion demanding severe punishment for unfair trading offenders following incidents such as the Ra Deok-yeon gate and the mass limit-down of five stocks, the passage of the amendment was not smooth. This was because the Court Administration Office pointed out that the method of calculating unjust profits and the increase in fines in the amendment had potential constitutional issues. This was an embarrassing situation for the government, which had declared its intention to strictly punish unfair trading offenders as a deterrent.

In response, the Financial Services Commission, Financial Supervisory Service, Korea Exchange, Ministry of Justice, and prosecution launched an all-out campaign to persuade the National Assembly and others. The Prosecutor General made an unprecedented visit to the Korea Exchange to publicly advocate for strict punishment of unfair trading, and the head of the Financial Supervisory Service also visited the National Assembly to meet with lawmakers directly. There are even reports that, unlike usual, the Financial Services Commission and the Ministry of Justice closely cooperated as the prosecution actively requested amendments related to unfair trading laws.

The passage of this amendment was considered an unusual event even within the Financial Services Commission, as the cooperation and pressure from multiple agencies were effective. It is rare for a bill that has passed the Legislation and Judiciary Committee to be stopped by the Court Administration Office.

On the other hand, when the government directly intervenes in market-formed prices to exert pressure, side effects inevitably follow. This is evident in Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho’s recommendation to lower ramen prices. With the upcoming general election next year in mind, the government and ruling party pushed the ramen industry under the banner of stabilizing the livelihood economy. After much deliberation, Nongshim lowered the ex-factory price of Shin Ramyun by 4.5% starting from the 1st. Ottogi also reduced the prices of 15 ramen products by an average of 5% from the 1st. Samyang Foods will sequentially lower prices of products including Samyang Ramen by an average of 4.7%. This is the first time in 13 years that these companies have cut ramen prices.

However, it was not only prices that fell. The stock prices of these companies also dropped. On the 19th alone, after Deputy Prime Minister Choo’s remarks became known, Nongshim’s stock price fell by 6.05%, Samyang Foods by 7.79%, and Ottogi by 2.94%. Nongshim, the leading ramen stock, dropped 11.5% from 450,000 won on June 1 to 390,800 won on the 30th. There are even disgruntled comments from shareholders of a certain company saying that while trying to lower ramen prices by 50 won, they lost 300 billion won in market capitalization.

Such cases are numerous. Korea Electric Power Corporation (KEPCO), suffering deficits due to the government’s pressure preventing timely electricity rate hikes, caused turmoil in the bond market by issuing a large amount of KEPCO bonds to raise funds. The controversy following the government’s announcement to exclude so-called "killer questions" from the College Scholastic Ability Test (CSAT) to reduce private education expenses is similar. While most people agree with excluding questions outside the curriculum from the CSAT, examinees and parents are distressed. The government only stirred confusion with the CSAT just months away. Following tax investigations into major private academies and so-called "star instructors," their anxiety has grown. This could potentially worsen the concentration on private education.

This is a case of a balloon effect where pressing one side causes the other to swell, resulting in similar yet different outcomes. It is a side effect of the government and ruling party’s coordinated push with seemingly plausible justifications. Opposing voices and complaints from innocent victims are buried as "minority opinions." It can also be interpreted as populist behavior aimed at consolidating support bases or courting votes ahead of the general election.

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