As of March 31, short selling has been fully resumed, leading to a sharp drop in stock prices, particularly in sectors such as batteries and chemicals, which had recently seen an increase in borrowings. Amid the drop in most stocks due to the effects of short selling from the previous day and concerns over U.S. mutual tariffs, there is growing uncertainty about whether to reassess investment strategies. Analysts suggest that for about a month, a strategy of buying market-leading stocks may be advantageous.
Generally, around the time of the resumption of short selling, there tends to be a concentration of short selling on stocks that have increased borrowings, or the concern about such potential short selling can lead to a decline in their stock prices. This can be viewed as being driven by supply and demand dynamics.
According to a KB Securities report, in fact, during the resumption of short selling in 2021, sectors with substantial increases in borrowings remained at the bottom in terms of revenue for 2 to 3 weeks. Even when observing the correlation between revenue prior to and after the resumption, it was often the case that the trends aligned for about 3 to 4 weeks post-resumption.
The stocks that have seen a sharp increase in borrowings have declined due to concerns over the resumption of short selling before it actually occurred and subsequently because actual short selling pressures emerged after the resumption. On the contrary, the market-leading stocks that drove the market before the resumption maintained their leadership status for about a month afterward.
However, after about three months post-resumption of short selling, the situation changes. Previous market leaders tend to become sluggish, whereas stocks that had not been in the spotlight begin to rise. Interpreting this, it suggests that selling current market-leading stocks as part of a strategy post-resumption may be appropriate at least after the end of the first quarter earnings season this year.
In the first quarter earnings report, companies with a high likelihood of experiencing an 'earnings surprise' and low borrowings are expected to show significant potential for future stock price increases. Relevant corporations include ▲DL E&C ▲HD Korea Shipbuilding & Offshore Engineering ▲HD Hyundai ▲HMM ▲SK Networks ▲SK Innovation ▲SPC Samlip ▲Samyang Foods ▲APR ▲Chong Kun Dang ▲Pulmuone ▲Korea Gas Corporation ▲Korea Electric Power Corporation ▲HANWHA GENERAL INSURANCE ▲Hyundai Rotem.
Conversely, with expectations of an 'earnings shock' in the first quarter, companies with high borrowings identified include ▲HD Hyundai Mipo ▲HD HYUNDAI INFRACORE ▲JYP Entertainment ▲LG Energy Solution ▲POSCO Holdings ▲NEXON GAMES ▲Nongshim ▲Doosan ▲Samsung SDI ▲NCSOFT ▲L&F ▲Kakao ▲POSCO ▲POSCO FUTURE M ▲KAI ▲Hotel Shilla.