Regulators, analysts caution investors against politically-driven stocks


Manufacturing, materials and rail shares linked to Kim Moon-soo rallied across the board on Monday, following the incumbent Gyeonggi governor’s official announcement that he will run for the presidency at the end of the year.

The jump has led the Financial Supervisory Service to strengthen its oversight over political-themed stocks, including ones related to other presidential hopefuls such as Seoul National University professor Ahn Cheol-soo and ruling Saenuri Party leader Park Geun-hye.

Analysts said that the rise of stocks that rally because of politics rather than business fundamentals will be short-lived.

“The rallying effects of stocks that have not been analyzed (by investors) are only temporary in nature,” said Han Chi-hwan , an analyst at Daewoo Securities.

Daeyoung Packaging, Baemyung Metal, Daejoo Electronic Materials and Daeati were some of the highlighted stocks connected to Kim that rose near the daily limit of 15 percent imposed by the Korea Exchange.

Shares of Daeyoung Packaging, a fiber board materials maker, ended up 117 won, or about 15 percent, at 903 won. Baemyung Metal, a stainless steel bars producer, closed at 625 won, up 81 won, or nearly 15 percent.

These stocks rose on hopes that a Universal Studio resort project will be carried out without setbacks. Kim has supported the Lotte Group-led project, estimated to cost around 3 trillion won ($2.6 billion). It is expected to be developed by 2016 in Hwaseong, Gyeonggi Province. Other conglomerates involved in the project include POSCO E&C, according to media reports.

Shares of Daejoo Electronic and Hansol HomeDeco that are related to Kim and his acquaintances or aides rose as well. Hansol HomeDeco, house interior materials maker, ended up 120 won, or 9 percent, at 1,450 won. Daejoo Electronic rose 1,400 won, or about 15 percent, at 10,850 won.

Daeati, buoyed by Kim’s plan for the Gyeonggi Train Express connecting the southern and northern areas of the province, ended up 60 won, or 3.6 percent, at 1,750 won.

By Park Hyong-ki (hkp@heraldcorp.com)