As the domestic stock market fluctuated due to the impact of the U.S. tariff policy, the number of market warning measures from the Korea Exchange has surged. It is interpreted that individual investors filled the vacancy left by large foreign investors withdrawing en masse, leading to an increase in short-term investments in low market capitalization theme stocks.
According to the Korea Exchange on the 9th, the market surveillance committee designated a total of 21 cases of investment warnings and investment risk stocks in the securities and KOSDAQ markets during the six trading days this month (1st to 8th). In the same period last year, only 2 investment warnings were designated. Compared to January (22 cases), February (16 cases), and March (8 cases) of this year, market warnings increased significantly over this short period.
Market warnings are a system that alerts the stock exchange when the price of a specific stock rises abnormally, indicating a high risk of speculative or unfair transactions. If a stock is designated as an investment warning stock, margin trading is blocked and credit transactions are restricted. If the stock price continues to rise thereafter, it is designated as an investment risk stock, and trading is suspended for one day.
Notably, despite the stock market crashing this month, the number of stocks for which market warnings were issued has increased. The KOSPI and KOSDAQ indices fell by more than 7% and 5%, respectively.
It is interpreted that the increased proportion of individual investors in the domestic stock market has been influenced by the large-scale withdrawal of funds from domestic stocks by foreign investors, who primarily invest in large-cap stocks. This month, foreign investors have net sold 7.7173 trillion won in the domestic stock market, while individuals have net bought nearly 5 trillion won, more than double the institutional purchases (2 trillion won).
Furthermore, in the early presidential election phase, political theme stocks are proliferating. GGUMBI is the only corporation designated as an investment risk stock this month. GGUMBI has been linked to policies promoted by Lee Jae-myung, the leader of the Democratic Party, regarding free school uniforms during his tenure as the mayor of Seongnam; trading was suspended after being designated a risk stock the previous day but was resumed today.
Stocks related to former People Power Party leader Han Dong-hoon, including Wanted Lab and Taeyang Metal Industrial, as well as stocks related to former Minister of Employment and Labor Kim Moon-soo, including THE WILLBES&CO and Pyung Hwa Holdings, as well as stocks related to Daegu Mayor Hong Joon-pyo, such as Humax Holdings, accounted for 86% of the total market warnings.
Moreover, dream-themed stocks related to low birth rate policies, such as GGUMBI, and preferred stocks of Heungkuk Fire&Marine Insurance, which have fewer trading stocks, were designated as investment warning stocks due to heightened price volatility.
Concerns are also raised that the current volatility in the stock market, driven by domestic and international issues, could lead to a deterioration in the quality of the domestic stock market in the long term, as there is a tendency for the spotlight to be focused on political theme stocks. Investors who rush to buy at high levels may face significant losses, as certain stocks experience repeated sharp fluctuations in price regardless of their corporate value.
Experts have advised that, in a situation of increased stock market volatility, it is advantageous to invest in leading stocks that are expected to improve their performance in the long term. Kim Yu-mi, a researcher at Kiwoom Securities, said, “The negative factors created by U.S. President Donald Trump's tariffs are overshadowing any potential positives,” adding, “It is necessary to respond by focusing on existing leading stocks in areas like shipbuilding and defense, which are in a tariff-free zone, and domestic stocks that may benefit from the supplementary budget.”