KRX boosts investor protection with active market alert system

Korea Exchange in Seoul / Yonhap

Korea Exchange’s Market Oversight Commission said Sunday that its market alert system appears to have contributed to investor protection and the prevention of unfair trading last year.

In its disclosure of the analysis of the system’s operation in 2024, the commission said the number of investment warning alerts, which indicate high investment risk, decreased by 44 percent — from 18 cases to 10 cases — due to prolonged weakness in the domestic stock market.

In contrast, the number of investment caution alerts rose slightly by 5 percent — from 2,359 cases to 2,473 cases — resulting in a 4 percent total increase in alerts from the previous year.

In the case of investment caution alerts, a significant portion was attributed to trading concentrated in a small number of accounts, which saw the largest year-on-year increase — rising 72 percent from 402 cases to 691 cases — likely due to a rise in management disputes and share buybacks.

The commission explained that, similar to 2023, which was marked by a volatile market driven by theme stocks such as artificial intelligence and secondary batteries, investor enthusiasm for theme stocks continued into 2024.

Last year, 868 market alerts, accounting for 32 percent, were issued for key themes, with a high portion linked to political themes, which accounted for 186 cases, or 21 percent, due to the effects of the April general elections and the Dec. 3 martial law declaration by the now-impeached President Yoon Suk Yeol.

The semiconductor sector, including semiconductor equipment and components, also accounted for a high proportion of alerts, with 180 cases, or 21 percent of the total.

Additionally, a temporary resurgence of COVID-19 brought renewed focus to COVID-related themes, which accounted for 136 cases, or 16 percent.

In response to the overheating of theme stocks, the commission proactively requested disclosures for abrupt price changes, resulting in a 25 percent increase — from 93 cases to 116 cases — in such requests compared to the previous year.

The analysis found that the market alert system helped prevent herd trading, reduce information asymmetry and stabilize price volatility, ultimately contributing to investor protection and the prevention of unfair trading.

The commission said it will continue using its market alert system to address emerging types of unfair trading and provide early warnings about investment risks.