Following SK hynix, No. 2 in market capitalization, defense bellwether Hanwha Aerospace was also designated as an investment warning issue. The Korea Exchange (KRX) has expressed its intent to improve the system, but if the year-end rally continues, there is still a possibility that large-cap KOSPI stocks will be designated as investment warning issues.
On the 15th, Hanwha Aerospace fell 5.52% (53,000 won) from the previous trading day to close at 908,000 won. The designation as an investment warning issue largely weighed on sentiment. Once designated, buyers must deposit 100% of the margin upfront, and margin purchases are banned. If the stock continues to surge after designation, trading risks being halted entirely.
Hanwha Aerospace was designated as an investment warning issue by the exchange at 8 p.m. on the 12th. This is seen as a spillover from the recent surge after news that SpaceX, the space exploration company led by Tesla CEO Elon Musk, is pushing for a U.S. listing in 2026.
Earlier, SK hynix had been designated an investment warning issue starting on the 11th, and top market-cap KOSPI names are being flagged in succession. Hanwha Aerospace was designated for the same reason as SK hynix, meeting the "ultra-long-term unwholesome rise" criterion.
Under this criterion, the closing price on the designation day must be at least 200% higher than a year earlier, be the highest among the last 15 trading-day closes, and there must be four or more days in the last 15 trading days when the top 10 accounts by buy-side involvement ratio, weighted for price impact, exceed a set threshold. The system was introduced after the long-term price manipulation case in small- and mid-cap stocks known as the "Ra Deok-yeon incident" in 2023.
As the domestic market has surged this year and large caps have posted big gains, more cases are tripping this criterion. Large caps with ample liquidity can jump relatively easily. In fact, Hyundai Rotem and Doosan Enerbility were also designated as investment warning issues recently.
The exchange moved quickly after investor backlash intensified following SK hynix's designation. The exchange said it will "change the designation criteria from simple returns to excess returns versus the stock index and consider excluding top market-cap names."
However, reforming the system is expected to take time. Amending the rules requires internal procedures, external feedback, and approval from the Financial Services Commission (FSC). An exchange official said, "The specific timeline has not been set, and it will take time to improve the system."
In this situation, it appears that lifting the designation for investment warning issues will take at least 10 trading days. According to filings, the first day to determine whether SK hynix's designation can be lifted is on the 24th, and for Hanwha Aerospace it is on the 29th.
Also, according to the exchange filings, for designated issues to be lifted, these corporations' share prices must rise less going forward. On the determination day, the closing price must not have risen 45% or more from the close five trading days earlier, must not have risen 75% or more from the close 15 trading days earlier, and must not be the highest among the last 15 closing prices, for the issue to be removed from the investment warning list.
An industry official said, "The purpose of this system is to alert investors when a stock price surges in a short period," adding, "It is not appropriate to designate as warning issues the stocks of corporations with market capitalizations of 407 trillion won and 47 trillion won simply because they rose a lot, and the system needs improvement."
Meanwhile, the number of cases designated as "investment warning issues" in the main board this year has reached 76. That is a 90% increase from the same period last year (40).