Short Selling Resumes Today... "Concerns Reflected in April First... The Stock Market's Advance"

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[Asia Economy Reporter Ji Yeon-jin] From the 3rd, short selling was partially resumed for KOSPI 200 and KOSDAQ 150 stocks. Since short selling is an investment technique that bets on stock price declines, there were concerns that it would pull down the index. However, the financial investment industry has continuously issued forecasts that the bullish market will continue this month.

On this day, the stock market started with mixed trends, but the KOSDAQ also succeeded in rebounding during the session. The KOSPI 200, which is subject to short selling, succeeded in rebounding early in the session, and the KOSDAQ 150 also reduced its losses during the session.

The financial investment industry analyzed that this resumption of short selling was already reflected in last month's correction market. The KOSPI began an upward trend from early last month, reaching a historic high (April 20, 3220.82), and then showed a decline for four consecutive days recently. This was due to a cautious stance amid concerns about uncertainty ahead of the short selling resumption. Shin Seung-jin, a researcher at Samsung Securities, said, "Despite the strong performance of our companies, April was a month filled with concerns about the resumption of short selling," adding, "Just as bad news that everyone worries about is not necessarily bad news, concerns about short selling were pre-reflected in the April correction."

Lee Jae-man, a researcher at Hana Financial Investment, also forecasted that short selling would be difficult to increase continuously as domestic companies' profits are in a growth phase. The profits of domestic companies are determined by exports, and since there is a high possibility of export improvement to China and Europe, corporate profits are expected to benefit significantly from the base effect. In fact, in 2010 and 2017, when KOSPI net profit estimates recovered based on the export base effect, the average was 17% higher than at the beginning of the year. Applying this, this year's KOSPI net profit estimate is expected to rise from the current 145 trillion won to a maximum of 152 trillion won in the third quarter. Converted to KOSPI, this means 3650 is also possible.

Daishin Securities also stated in a report released on the same day that although there are concerns about overheating as the global stock market has rapidly entered an upward phase since last month, the global stock market in May is more likely to rise further. For the U.S., they cited the approaching herd immunity period due to the expansion of COVID-19 vaccinations and the fact that the Federal Reserve's monetary policy shift will not occur abruptly. Researcher Lee Kyung-min said, "It is necessary to focus more on earnings improvements, which are the background of this year's stock market rise," adding, "Since the second quarter is a time to write a new history in the stock market, a strategy to increase the proportion of growth stocks is effective."

Some analysts believe that the impact of the current resumption compared to the short selling ban last year will not be significant, as the investment environment has changed. Even looking at past short selling resumption points, there were short-term shocks, but stock prices mostly recovered within 100 trading days. Bae Han-joo, a researcher at Shinhan Financial Investment, explained, "Contrary to general market perception, there is a positive correlation between KOSPI 200 returns and changes in short selling balance amounts," adding, "Considering the scale of short selling relative to market size and institutional measures such as the 'uptick rule,' short selling tends to flow in during market upswings and realize profits by covering short positions during downturns, rather than leading stock price declines. This is why the resumption of short selling is unlikely to act as a trigger for stock price drops."

This content was produced with the assistance of AI translation services.