A 30-year-old unemployed South Korean who predicted a collapse in the country's stock market has been charged over his pessimistic financial blogging.

The decision to prosecute Park Dae-sung for allegedly posting false information online has provoked a political storm as the conservative ruling party of President Lee Myung-bak demands new laws governing "cyber slander".

Writing under the pseudonym Minerva, the blogger became a household name for his largely accurate forecasts of sharp falls in Korea's won currency, the national stock market and the demise of US investment bank Lehman Brothers.

Amid intense speculation over his identity, each of Minerva's postings attracted about 100,000 readers.

Opposition parties claim he has been targeted because his gloomy forecasts have upset the government as it battles to save its reputation amid the severe economic downturn.

Prosecutors maintain that Park hurt the currency by posting incorrect information online. "The suspect in this case was indicted on charges of false information on two occasions," said an official at the prosecutor's office.

As South Korean markets tumbled last year, the state's main financial regulator warned it would crack down on what it considered malicious rumours. Some economic analysts have reported that they have come under pressure from the authorities not to voice negative sentiments about the economy.

"The prosecution hurriedly went ahead with its investigation and a court readily gave prosecutors a permit to conduct a witch-hunt," the liberal Hankyoreh daily said in a recent editorial, calling the case an infringement of freedom of speech.

Park Dae-sung faces up to five years in prison if he is found guilty of violating communications laws.

Since his detention this month, legal experts have questioned whether the authorities had legal grounds to prosecute individuals.

"The Minerva case shows that the tradition of rule of law has yet to set root firmly in our society," said Ji Seong-woo, a law professor at Dankook University.

Since Park's detention, it has emerged that he was a quiet man who never went to university and whose financial expertise came from economics text books and websites. In a society that places high value on an elite education and employment at prestigious firms such as brokerages, there is a growing suspicion that he is being punished because of his social status.

"Should Park be punished, it should be for his conduct and not because he is some thirty-some-year-old unemployed two-year technical college graduate," Ji said.

The South Korean currency fell 28% last year and the main share index slumped 40%. Earlier this week the president reshuffled his top economic officials, replacing his widely criticised finance minister in an attempt to prevent Asia's fourth largest economy from sliding into its deepest recession in 11 years.