[Edaily Reporter Shin Ha-yeon ] It has been revealed that in one out of every four cases where a stock was designated as an “investment warning” or “investment risk” stock by the Korea Exchange (KRX), the stock price subsequently plummeted by more than 30% within 20 trading days. Although market alerts serve as a warning of sharp price spikes and potential unfair trading, there were numerous instances where retail investors actually bought into these stocks while foreign and institutional investors were offloading their holdings.

According to data submitted by the Korea Exchange to the office of Rep. Park Seong-hoon of the People Power Party, a member of the National Assembly’s Political Affairs Committee, on the 20th, a total of 1,548 stocks were designated as “Investment Warning” or “Investment Risk” stocks from 2022 through August of this year. Of these, 1,429 were designated as “Investment Warning,” while 119 were designated as “Investment Risk,” a higher alert level.

The Korea Exchange operates a market alert system to warn investors of risks associated with stocks where there is a possibility of unfair trading, such as a sharp rise in stock prices over a short period or trading concentrated in a small number of accounts. Market alerts are categorized into three levels: “Investment Caution,” “Investment Warning,” and “Investment Risk.”

Analysis showed that in a total of 1,050 cases—accounting for 68% of the total—stock prices had fallen 20 trading days after the market alert designation compared to the day of designation. This means that for about 7 out of every 10 stocks that received a market alert, the stock price was lower about a month later than it was at the time of designation.

The magnitude of the declines was also significant. In 636 cases, stock prices fell by more than 20% 20 trading days after the designation compared to the designation date. There were also 398 cases where prices plummeted by more than 30%, accounting for one in every four market alert designations.

The decline was even more pronounced for stocks designated as “high investment risk,” the highest warning level. Among the 119 stocks designated as high investment risk, share prices fell by an average of 15.6% 20 trading days after the designation.

Meanwhile, while market alerts serve as a signal to exercise caution when investing in stocks that have become overheated in the short term, it appears that retail investors continued to actively buy certain stocks even after the alerts were issued.

An analysis of 41 domestic KOSPI and KOSDAQ stocks designated as “investment warnings” or “high-risk investments” during the month of August revealed that, from the date of designation through the 18th of this month, foreign and institutional investors were net sellers, while retail investors were net buyers in 13 of those stocks. In one out of every three warned stocks, retail investors absorbed the selling pressure as foreign and institutional investors exited.

The stock with the largest volume of net buying by retail investors was Woori Technology, Incorporation(032820). From the 11th of last month, when Woori Technology, Incorporation was designated as an “investment warning” stock, through the 18th of this month, retail investors made net purchases totaling approximately 85.9 billion won. During the same period, foreign investors made net sales of 49.2 billion won, and institutional investors made net sales of 36.6 billion won.

SUNGHO ELECTRONICS CORP.(043260) WONIK HOLDINGS CO.,LTD.(030530) also saw individual net purchases exceed 22.9 billion won following its designation as an “investment warning” stock. This was followed by with approximately 20.6 billion won, with approximately 14.6 billion won, and with approximately 13.4 billion won, in that order. OE Solutions Co., Ltd.(138080) KumhoElectric(001210)

Despite the risk of falling stock prices materializing among stocks under investment warnings or classified as high-risk, retail investors continue to chase the market, leading to calls for strengthening the effectiveness of market alerts and investor protection.

The exchange eased some regulations related to market alerts this year. After announcing a revision to the regulations last April, it abolished the requirement to collect a 100% cash margin on purchase amounts for stocks under “Investment Warning” or “High-Risk” designations.

The exchange explained that this measure was taken in response to criticisms that the regulations were excessive compared to global standards. However, other measures to curb market overheating—such as bans on margin trading and trading suspensions—remain in place.

Rep. Park Seong-hoon stated, “Market alerts are not merely warning labels but safety mechanisms designed to alert investors who jump into rapidly rising stocks too late to the risks involved,” adding, “Even if regulations are relaxed, investor protection measures—such as risk disclosures and monitoring of abnormal trading—must not be loosened.”