'Bedbug' stocks soar amid investors' race to make quick cash

Recent reports of bedbug infestations in various public spaces, including a university dormitory, low-cost apartments, and saunas, have raised alarms of an impending nationwide outbreak across South Korea, prompting the government to launch a multi-agency task force on Tuesday.

But, it turns out bedbugs are causing more than just itchy bites -- they're now making waves in the South Korean stock market, as savvy investors are bullish on pesticide manufacturers.

On Tuesday, agrochemical companies producing pesticides saw their stocks jump by about 5 percent. The biggest winners were Kyungnong (Kospi 00210), Inbio (Kosdaq 352940) and Kyungnam Pharm (Kosdaq 053950), all of which saw their stocks shoot up to the 30 percent ceiling set by the Korean stock market for daily trading gains.

Kyungnong kept the ball rolling into Wednesday, with its stock price jumping another 9% right at the opening bell and hitting its highest point in a year.

The upswing follows reports that bedbugs have developed resistance to traditional pyrethroid-based pesticides widely used in the country. Kyungnong and Inbio, both experiencing substantial gains, are known to manufacture a newer class of pesticides based on neonicotinoids -- a compound chemically similar to nicotine.

Meanwhile, market analysts advise caution before jumping on the bandwagon, noting that the uptick fits a known pattern within the local stock market. Locally known as the "themed stock" phenomenon, these short-lived, hype-fueled market rallies involve speculative investments in companies with no substantial earnings history that often have nothing to do with the real-world events driving the hype.

In one high-profile instance following last year’s presidential election, investors flocked to stocks of certain companies simply because their owners happened to share the President-elect's surname, Yoon.

What’s worse, such market swings often leave everyday retail investors falling prey to manipulative tactics of big market players equipped with high-frequency trading strategies and large-scale short selling schemes. Capable of whisking away one’s hard-earned money in an instant, these aggressive trading tactics may very well strike some as a graver threat than the bedbugs themselves -- which is another reason to exercise caution with such stocks.