SK hynix shares plummet with Korea Exchange's 'warning' designation

SK hynix, the second-largest company on the Kospi by market capitalization, saw its stock price plummet on Thursday after it was hit with an "investment warning" by the Korea Exchange.

SK hynix's headquarters is seen in Icheon, Gyeonggi on Oct. 29. [YONHAP]

SK hynix, the second-largest company on the Kospi by market capitalization, saw its stock price plummet on Thursday after it was hit with an "investment warning" by the Korea Exchange.

SK hynix closed trading at 565,000 won ($380) on the securities exchange on Thursday, down 3.75 percent from the previous day’s closing price. SK Square, which was also designated an investment warning stock, ended at 307,500 won, a drop of 5.09 percent.

Both stocks opened lower due to the label and extended their losses later on in the trading session. The Market Surveillance Committee of the Korea Exchange announced the designations via a disclosure on Thursday.

Investment warnings are issued by stock exchanges for listings exhibiting unusual market behavior or volatility. The Korea Exchange increases regulatory oversight in the order of “investment caution” to “investment warning,” followed by “investment risk” if signs of overheating are detected.

Over the past year, the stock prices of SK hynix and SK Square have soared 221.9 percent and 269.1 percent, respectively.

The decision was based on the fact that Wednesday’s closing price rose more than 200 percent compared to the closing price on Dec. 10, 2024, and on more than four days out of the past 15 trading days, the top 10 accounts were found to have exceeded thresholds in buying activity.

A man walks past the logo of SK hynix during a semiconductor exhibition at Coex in Gangnam District, southern Seoul, on Oct. 24, 2024. [AFP/YONHAP]

Once designated an investment warning stock, investors must pay a 100 percent margin when buying shares. Margin trading is not allowed, and buying through credit loans is restricted. Trades are also blocked on alternative trading systems. In essence, short-term buying pressure on these stocks is curbed.

Just a day earlier, news broke that SK hynix was considering issuing American depositary receipts, which spurred expectations that access for foreign investors would improve.

Optimism over the semiconductor industry’s recovery, driven by growing global demand for AI, also bolstered investor sentiment, leading SK hynix to surge 3.71 percent and SK Square to gain 0.3 percent. However, the market mood reversed sharply the next day after overheating concerns emerged.

An HBM4 chip, SK hynix’s sixth-generation high bandwidth memory, is displayed at the company’s booth during Semiconductor Exhibition 2025 at Coex in Gangnam District, southern Seoul, on Oct. 22. [YONHAP]

Reviews on lifting the investment warning designation will start on Dec. 24, based on daily stock price trends. The key criteria will be whether the stock stabilizes over a certain period.

However, if the stock price rises more than 40 percent in the two days following the designation and exceeds the closing price before the warning, trading may be halted once.

Investors have been expressing dismay over the measure. Critics argue that the guardrail, which is typically applied to small- and mid-cap theme stocks showing signs of abnormal trading, is being applied too rigidly to a large-cap stock. SK hynix’s market capitalization stood at 411.32 trillion won based on the closing price on Thursday.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY KIM IN-KYOUNG [lim.jeongwon@joongang.co.kr]