As South Korea’s presidential race heats up, stocks loosely tied to potential candidates are seeing dramatic price swings — often fueled by speculation rather than substance.
Sangji Construction, listed on the KOSDAQ, surged 712% between Feb. 2 and Feb. 15, rising from 3,165 won ($2.22) to 18,000 won ($12.64). The rally spanned eight trading days, excluding Feb. 10 and Feb. 15, when the stock was suspended after being flagged as an investment warning or risk.
Notably, the surge came without any positive corporate news. On the contrary, Sangji swung from a $26 million profit in 2023 to an $18.6 million loss last year, according to a business report filed on Mar. 21.
When the Korea Exchange asked for clarification on Feb. 7, the company said it had no significant information to disclose.
According to a financial industry official, the stock’s spike appeared driven by one factor: Sangji’s classification as a speculative stock linked to Lee Jae-myung, former leader of the Democratic Party. The connection? A former outside director had reportedly joined Lee’s presidential campaign — a tenuous link that nonetheless triggered speculative buying.
As the June 3 election approaches, politically themed stocks are once again rallying in South Korea, many on little more than rumors or vague associations.
A study by the Korea Capital Market Institute analyzing 83 politically themed stocks during the 2022 election found that 44% were linked to candidates solely through acquaintances, with most connections unrelated to company business.
Orient Precision, an auto parts supplier affiliated with Orient Watch, jumped more than tenfold since December after investors tied the firm to Lee Jae-myung, who once worked for Orient Watch.
Adding to the confusion, Oriental Precision & Engineering, a shipboard crane maker with no relation to Lee, also surged because of its similar name.
Some stocks connected to ruling bloc figures rallied on equally flimsy grounds. DaeYoung Packaging, for example, was labeled as politically linked to former Employment and Labor Minister Kim Moon-soo because its plant is near a proposed Universal Studios resort project Kim backed while Gyeonggi Province governor.
Sunny Electronics drew investor attention as a stock associated with Ahn Cheol-soo, a member of the ruling People Power Party, because its former CEO previously worked at AhnLab, the company Ahn founded.
Sigong Tech, specializing in exhibition and cultural facilities, surged on speculation that acting President and Prime Minister Han Duck-soo might run for president. Investors noted the firm’s largest shareholder had served with Han in a presidential economic advisory council in 2008, during his earlier term as prime minister.
The stock, which had been trading around $2.80, jumped to $5.60 on Mar. 14. A day later, Rep. Kweon Seong-dong of the ruling party announced Han would not enter the race, and the stock dropped 12% overnight.
Daesang Holdings was swept up in politically driven trading last April ahead of the general election. Shares were seen as linked to former ruling party leader Han Dong-hoon due to a personal connection: actor Lee Jung-jae, a high school classmate of Han, was rumored to be dating Daesang Vice Chairwoman Lim Se-ryung. The stock peaked at $8.47 on Feb. 23, then tumbled 30.5% to $5.89 by Apr. 11, the day after the vote.
Even stocks tied to victorious candidates weren’t spared sharp reversals. Dongshin Construction, which soared on its association with Lee’s hometown, dropped 35% from $21.57 on Mar. 25 to $13.98 by Apr. 11.
Hwacheon Machinery, which investors linked to Cho Kuk — head of the Cho Kuk Innovation Party — because a former auditor had attended the same law school as Cho at the University of California, Berkeley, sank 53% over the same period, from $6.30 to $2.96.
