The stock of CanvasN fell to the price limit on the 29th. The stock plummeted as some investors' holdings were liquidated through short selling. The amount of short selling was about 100,000 shares, accounting for approximately 12% of the total transaction volume that day.
CanvasN, a drama production corporation, has actively promoted its securities token (STO) business since the launch of the Lee Jae-myung government, leading to an increase in its stock price. Amid the new government's commitment to legalize STOs, news of CanvasN entering the related business caused its stock price to more than double in May.
However, as interest in theme stocks related to STOs waned, the stock price fell, and short selling volumes increased that day.
As the stock market shows a boom, the number of those borrowing money to invest in stocks, known as 'debt investors,' is increasing, leading to growing warnings about short selling. While the KOSPI index continues to rise, the bubble of policy-themed stocks that surged has been deflating, resulting in an increase in cases of short selling.
The scale of margin trading, where money is borrowed from securities firms to buy stocks, has recently reached its highest level of the year. According to the Korea Financial Investment Association, as of the 25th, the scale of margin trading amounts to 21.83 trillion won. This is the largest figure this year and indicates an increase of more than 4 trillion won compared to the 17.4 trillion won recorded on April 25, three months ago.
The problem is that some debt investors using margin trading are increasingly incurring losses through short selling, particularly in theme stocks. Securities firms demand additional collateral from investors when the price of the collateral stock falls below the collateral ratio, or sell the stocks through short selling to recover the loans.
For example, Furonteer, which gained attention as a self-driving theme stock, has a margin balance amounting to 14.2% of its market capitalization. However, in July, as the stock price plummeted, daily short selling amounted to around 20%. The secondary battery theme stock THiRA-UTECH also saw its margin balance proportion at about 11%, with significant amounts of short selling pouring in due to the recent drop in stock price.
Despite the booming stock market, there are concerns about the need for caution as cases of short selling are emerging among some stocks. As policies such as amendments to the Commercial Code and separate taxation of dividends are being pursued, investments should be considered based on earnings, business stability, and growth, rather than short-term issues.
Kim In-sik, a researcher at IBK Securities, noted, “The domestic stock market is likely to continue in a favorable environment, but the sharp rebound is raising concerns about excessive leverage-based investments.”