Korea Exchange raises guard against biopharma shares

The Korea Exchange headquarters in Yeouido, western Seoul (Korea Exchange)

The Korea Exchange, the country's sole bourse operator, has recently voiced alarm about excessive and speculative trading of biopharmaceutical stocks tied to the resurgence of COVID-19 and the spread of mpox.

Retail investors' interests in pharmaceutical and biotech stocks have soared in recent weeks amid the country’s heightened caution against infectious diseases.

Buoyed by short-term speculations, stock prices of some biopharmaceutical companies have experienced a sharp gain recently, according to the Korea Exchange.

Between Aug. 1 and 20, the bourse operator’s Market Oversight Committee issued "investor alerts" on 15 shares for a total of 33 times, as the stock prices jumped by an average of 82.7 percent.

Among the 15 shares, three were listed on the benchmark Kospi, while 12 were listed on the secondary bourse Kosdaq. The stocks of Kosdaq-listed biopharmaceutical company Cellid advanced the sharpest, jumping 236.6 percent during the period.

"Some themed stocks experience a price surge following speculative demands. Level-headed judgment on the authenticity and potential of business is necessary before making investment decisions," the bourse operator warned.

The operator further shared incidents of companies that tried to take advantage of the concerns over public health.

Amid the shortage of face masks during the COVID-19 pandemic, a company made a regulatory filing, announcing that it has secured a massive deal to supply the masks. The announcement led to a sharp rise in the stock price.

But later the company went back on its words, revealing that the deal had been withdrawn. The bourse operator designated the company as a violator of disclosure regulations, which led to a plunge in its share price.

Another company experienced a surge in its stock price after it announced its plans to develop a vaccine and treatment for coronavirus. However, unable to yield tangible results, the company continued to post losses in operating profits. It even met certain standards for delisting, the bourse operator explained.

“The Korea Exchange’s Market Oversight Committee is to closely monitor shares related to COVID-19 and mpox. If the committee picks up on acts of unfair trading, it will respond strongly in cooperation with the financial authorities,” the Korea Exchange said.

By Im Eun-byel(silverstar@heraldcorp.com)