The Korea Exchange (KRX) moved to improve the system related to the criteria for designating investment warning issues. As market leaders and large-cap stocks, including SK hynix, were successively labeled as investment caution and warning issues amid this year's KOSPI surge, fueling investor complaints, the exchange has begun working on countermeasures.
The Korea Exchange (KRX) said in a news release on the 11th that it will review improving the system by changing the criteria for designating investment warning issues (ultra-long-term rise and unhealthy conditions) from simple returns to excess returns relative to the stock index, and by excluding top market capitalization stocks. A plan to exclude top market capitalization stocks from designation is also under discussion.
This follows the designation the previous day of SK hynix, the No. 2 stock by market cap in Korea, as an investment warning issue. After the designation, SK hynix became subject to trading restrictions, including 100% upfront margin payment, exclusion from eligible collateral securities, and a ban on margin purchases.
The exchange said the designation of SK hynix as an investment warning issue was the result of a system introduced and implemented to guide caution on issues manipulated over a long period, in connection with the stock price declines related to contracts for difference (CFD) that occurred on Apr. 2023.
Earlier, the exchange designated SK hynix and SK Square as investment warning issues on the grounds that they rose more than 200% compared with the closing price a year earlier and hit the highest closing price in the past 15 days. The fact that, during the period, there were four or more days when the buy involvement rate of the top 10 accounts affecting prices exceeded the threshold also served as a reason for designation.
According to the Korea Exchange (KRX), as of the 10th this year, there have been a total of 72 designations of investment warning issues on the KOSPI market, already surpassing last year's annual total of 44. The number of designations of investment risk issues, the highest level in the market alert system, also reached seven this year, compared with one last year.