South Korea's Market Alerts Surge to 71 This Year

With the KOSPI experiencing a significant upward movement this year, the count of stocks marked with tags like 'investment risk' and...

With the KOSPI experiencing a significant upward movement this year, the count of stocks marked with tags like 'investment risk' and 'investment warning' has also been rising. Indications of an overheated market are becoming more evident, and the range of market alerts is growing quickly.

As reported by the Korea Exchange on the 13th, a total of 71 stocks have been classified as 'investment warning' or 'investment risk' in the securities market since the start of this year. Last year's total was 49, indicating that this year's number has already exceeded the previous year's figure by November.

The Korea Exchange Market Oversight Commission issues notifications in three levels—'investment caution,' 'investment warning,' and 'investment risk'—for stocks involved in speculative activities or suspected of unfair trading practices, or those that have seen unusual price increases. When a stock is classified as 'investment warning' or 'investment risk,' trading could be halted.

What makes this year unique is the large number of high-market-cap stocks that have been flagged as alert targets. On the 3rd, SK Hynix, South Korea's second-largest company by market value, gained attention after being labeled an "investment caution" stock. The Korea Exchange stated, "SK Hynix's stock price has increased by over 200% compared to a year ago, and the participation rate of specific accounts in buying has surpassed a certain level, resulting in its classification as an investment caution stock." They further mentioned, "If it achieves the highest closing price in the last 15 days by the 17th, it may be classified as an investment warning stock."

Previously, on the 30th of last month, Hanwha Ocean, and on the 27th, HD Hyundai Heavy Industries were marked as stocks under investment warning. In June, KakaoPay, which had risen due to a stablecoin issue, was even classified as an 'investment risk' stock, the highest level of alert. A Korea Exchange official stated, "This year, with the presidential election, there was a clear upward movement in policy-related theme stocks and major semiconductor stocks." They further mentioned, "It is accurate that market alerts have primarily focused on these stocks that experienced substantial price increases."

With the growing number of stocks targeted by market alerts, some investors are now viewing these alerts as a 'sign of interest'. The expression "an investment warning is a badge of honor" has even come into use. A industry insider stated, "Currently, there are investors who specifically purchase stocks that have received market alerts, referring to them as 'galnomgal' (stocks that were destined to rise have indeed risen)."

Nevertheless, there is increasing demand for investors to be cautious as the stock price fluctuations of alert-designated stocks have recently risen. Nota AI, a company specializing in artificial intelligence technology, experienced a drop of 24.2% in its stock price on the day following its designation as an investment warning stock, after regular trading ended on the 10th. Hyosung also finished 7.8% lower on the 12th after being classified as an investment warning stock.

Experts highlighted that as the first line of defense for investor protection, the market alert system should not be seen merely as a basic warning. Instead, investors are advised to conduct thorough evaluations using multiple factors such as company performance and market trends before making investment decisions. Hwang Se-woon, a researcher at the Korea Capital Market Institute, stated, "When an investment warning is issued, it should be a moment for investors to reevaluate if the current stock price movement is reasonable." He further noted, "Although stock prices might drop considerably after such a designation, the prior price could have been influenced by excessive speculation."