The number of stocks designated for market alerts this year has risen nearly 2.5-fold from a year earlier, as market volatility has increased. The rise is attributed to a high-volatility market in which even large-cap stocks move around 10% in a single day, with speculative fever spreading to short-term theme stocks in construction, cables, and optical communications.
According to the Korea Exchange on the 10th, a total of 3,428 stocks were designated as "investment caution," "investment warning," or "investment risk" stocks in the securities and KOSDAQ markets from the beginning of this year through the previous day. That marks an increase of 2,030 (145.2%) from 1,398 during the same period last year. By type, investment caution rose 151.1%, investment warning rose 98.8%, and investment risk rose 190.0%. In particular, designations climbed from the 400s range in January and February to the 500s range in March through May, and to the 700s range in June.
The market alert system is a mechanism to alert investors to stocks that may be subject to unfair trading or whose share prices have risen excessively over a short period, with alert levels escalating according to the degree of risk.
The backdrop for the increase in market alert designations is expanded market volatility. It is interpreted that speculative funds seeking short-term gains flowed in during periods of sharp market swings, driving up the number of alert designations. In May, stocks such as Fidelix, Gaon Cable, and Daewon Cable preferred shares were designated as investment risk stocks in connection with the "memory and optical communications theme." In late June, Kumho Construction preferred shares, Kumho Electric, and Namhwa Toga drew attention on news of the "creation of a semiconductor cluster in the Honam region," and this month theme-driven trading continued in stocks including Ilsung Construction, Kumho Construction, and Dongyang Pile. Buying interest shifted rapidly toward small- and mid-cap stocks attached to specific catalysts.
Typically, share prices swung sharply after stocks were designated for market alerts. Of the 330 investment warning designations this year, 227 cases, or 68.8%, saw share prices fall on the next trading day after designation. Investment caution stocks also declined the next trading day in 61.2% of cases, and 19 of 29 investment risk stocks fell. Analysts in the securities industry note that excessive investment should be guarded against, especially during periods of high index volatility. Lee Young-gon, head of the research center at Toss Securities, said, "The biggest factor behind the increase in market alert designations is expanded market volatility." He added, "With even single-stock leveraged products now available, reckless investment can amplify risks."
