"Gangnam Style" Investments
In South Korea, investing is like fashion. It comes and goes with the style.
Local retail investors, often referred to by professionals as gaemi-deul, or “ants,” have a tendency to invest in theme stocks.
Theme stocks are South Korean fads. They're stocks that catch the public attention because of a publicity stunt or big move regarding company executives, often entirely unrelated to the company's actual activities.
These stocks have no apparent reason to go up. According to the Economist, ants are known to jump at the tiniest of incidents. But when they do go up, it's usually by a significant amount...and for only a short time.
One example of this – likely an example of someone taking advantage of the ants – was when a picture circulated of presidential candidate Moon Jae-in with a man who appeared to be the CEO of clothing company Daehyun.
Of course, it wasn't the CEO in the picture. Still, Daehyun shares skyrocketed 350% following the incident.
The Financial Services Commission (FSC) suspected that this was a pump-and-dump. One man made 1.1 billion won, or roughly $1 million, off the spike, and it's likely he was behind the photograph's circulation.
Marriages are also known to catch the attention of ants and cause a stock to spike – particularly when the child of a company owner marries into the family of a global conglomerate.
The Economist reports on a time when the daughter of the owner of local company Bolak married into the LG family. Bolak saw a huge boost, moving from 2,000 won to 9,000 won (or roughly $1.80 to $8.09).
Today, Bolak shares are back down – though not all the way – to 3,110 won, or $2.80.
Now shares of another South Korean company are receiving an equally artificial and even more unlikely boost.
PSY, the rapper responsible for the viral hit “Gangnam Style” that's topping both the UK and American charts, has drawn a lot of attention to South Korea.
Incidentally, PSY, whose real name is Park Jae-sang, is the son of Park Won-ho, the CEO of South Korean semiconductor firm DI.
And as you might expect, as “Gangnam Style” blew up globally, so did shares of DI.
In three weeks, shares of DI went from 2,000 won to 5,700 won, or $1.80 to $5.12.
The company itself is actually doing rather poorly. It posted losses for the last four consecutive quarters. Its products aren't particularly fascinating or widely demanded.
But, like any company even remotely tied to South Korea's upcoming presidential election, DI will continue to ride high off of PSY's quirky, catchy, viral hit.
After all, doesn't this just make you burn to invest in something?+3
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