Recently, the domestic stock market has risen for seven consecutive trading days, surpassing previous highs, and the value of short selling transactions has exceeded 1 trillion won for the first time in two months. There are analyses suggesting that investors have engaged in hedging due to the steep rise in the stock market and potential short-term corrections.
According to the Korea Exchange on the 13th, the value of short selling transactions in the KOSPI reached 1.0618 trillion won as of the 12th. This is the first time it has exceeded 1 trillion won in nearly two months since April 9 of this year.
The net short selling balance of the KOSPI first exceeded 7 trillion won on the 4th, the first day of Lee Jae-myung's government, and has maintained the 7 trillion won level for four trading days. This is the highest level since short selling was fully resumed on March 31 of this year. The net short selling balance refers to the monetary value of stocks borrowed for short selling that have not been covered, reflecting stock price increases as well.
The borrowing balance, regarded as a leading indicator of short selling, also recorded its highest level since the resumption of short selling. As of the 12th, the borrowing balance stood at 87.1868 trillion won. The borrowing balance is the total value of borrowed stocks, and since stocks must be borrowed first in order to short sell, there is a close relationship between borrowing balances and short selling.
As the stock market has shown a steep upward trend, analyses suggest that investors have increased short selling as a means of risk diversification. Concerns about short-term peaks, along with forecasts of potential adjustments in various sectors, have also been interpreted as influencing the activation of short selling.
Jo Min-kyu, a researcher at Shinhan Investment Corp., noted, "It appears that foreign and institutional investors have engaged in short selling as a means of hedging. The foreign investors who held short positions in individual futures are trending towards moving those positions to short selling."
Jo added, "The sectors that saw a significant increase in short selling proportions among those stocks that experienced steep short-term gains can be interpreted as bets against a potential short-term decline."
Recently, there are analyses suggesting that the increase in short selling values indicates that existing short coverings are being completed and new short positions are entering the market. Short covering refers to the act of buying back stocks borrowed for short selling to minimize losses when the stock price rises unexpectedly.
Woo Ji-yeon, a researcher at DS Investment Corp., stated, "The expansion of supply and demand from foreign investors, which drove the steep index rally, has partially been influenced by short covering. During this period, the short selling balance of foreign investors sharply decreased, and the major stocks being bought by foreign investors were identified as SK hynix, Samsung Electronics, and Doosan Enerbility, which are among the top stocks for cumulative short selling over 20 days."
Woo added, "The recent increases in short selling balances and borrowing balances indicate that existing short coverings are concluding and new short positions are entering the market. Given that the influx of foreign net buys has slowed, it is possible that the short-term upward momentum of the KOSPI has weakened."