[Inside Chodong] Investor Sentiment Shaken by Theme Stock Volatility

After War-Related Stocks, Political Theme Stocks Experience Volatility
Concerns Rise Over Political Theme Stock Frenzy as General Election Nears

Since the beginning of the year, various themes have been stirring in the domestic stock market. Related stocks have continued to rise amid expectations for growth in the artificial intelligence (AI) industry, and robot-related stocks have also caught attention due to investment expectations from groups like Samsung and LG. The emergence of theme stocks is nothing new in the history of the stock market. However, it should not be forgotten that many individual investors who invested in theme stocks aiming for short-term capital gains have suffered losses.

Recently, as geopolitical risks on the Korean Peninsula have increased, war-related stocks have attracted attention. The most paradoxical theme in the domestic stock market is war-related stocks. When North Korea’s provocations intensify, defense industry stocks surge. This is based on the logic that they would benefit if a war breaks out. However, speculators who ride the theme stocks aiming for short-term profits buy these stocks based on the belief that war will not occur. The theme of war-related stocks is created by the logic that they would benefit if war breaks out and the psychology that war will not happen.

At the Supreme People’s Assembly held on the 15th, North Korean State Affairs Commission Chairman Kim Jong-un instructed, "If a war breaks out on the Korean Peninsula, the constitution should reflect the complete occupation of the Republic of Korea and its incorporation into North Korean territory." On the 16th, President Yoon Suk-yeol stated at a Cabinet meeting, "If North Korea provokes, we will retaliate several times over."

Amid concerns about North Korea’s threats, foreign investors sold stocks worth 1 trillion won in the domestic market on the 17th. The KOSPI and KOSDAQ indices fell by 2.47% and 2.55%, respectively. As investor sentiment rapidly contracted, the stock prices of Speco, an asphalt plant company, and Bigtek, which supplies electronic warfare system direction-finding devices, soared. Speco’s stock price, which had risen to 5,950 won around 2 p.m. the next day, closed at 5,090 won. Although it rose more than 7% compared to the previous day, many investors who traded intraday likely suffered losses. Bigtek’s stock price plunged more than 10% compared to the previous day. Even though there was no change in the standoff situation within a day, Speco’s stock rose while Bigtek’s fell. This illustrates how difficult it is to predict theme stock prices.

Stocks related to low birthrate countermeasures fluctuated on the 18th. The People Power Party’s General Election Pledge Development Headquarters announced plans to present concrete solutions to low birthrate and childcare issues as Emergency Response Chairman Han Dong-hoon’s "No. 1 pledge," influencing investor sentiment. Agabang Company started trading at 7,040 won and rose to 7,180 won within 11 minutes. Afterwards, the stock price retreated until the market closed, finishing at 6,070 won. Zero to Seven surged to the upper price limit but gave up most of the gains.

While theme stocks can record high returns in a short period due to their volatility, the possibility of losses is also high. Investors who entered low birthrate countermeasure-related stocks after seeing the political theme stock surge at the end of last year likely expected high returns. However, the results were different from expectations, and investors who bought at the peak probably suffered losses exceeding 10% in just a few hours.

Kim Hyung-ryul, head of the Kyobo Securities Research Center, emphasized, "It must be clear that investing in theme stocks is not a sustainable investment," adding, "You can ride the flow and momentum, but there is no need to share the fate of theme stock companies."

As the general election approaches, political theme stocks are likely to become rampant. The deadline for audit reports is also approaching. The possibility of malicious forces trying to make a big profit by riding themes is higher among marginal companies. Investors should keep in mind that trying to profit from theme stocks may lead to empty accounts.

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