Institution Bets on 'Stagflation'... KOSPI Short Selling Doubles

7-Day KOSPI Short Selling Trading Amount 824 Billion KRW
Second Largest Scale Since Partial Resumption of Short Selling
Institutional Investors' Short Selling Share 55%, Foreigners Lead for the First Time

[Asia Economy Reporter Ji Yeon-jin] As the Russia-Ukraine war shows signs of prolonged conflict, short-selling transactions surged in the KOSPI market on the 7th, when the domestic stock market plummeted. This was the result of institutional investors betting on 'stagflation,' a situation where inflation and economic recession occur simultaneously.

According to the Korea Exchange's short-selling portal on the 8th, the short-selling transaction amount in the securities market the previous day was 824 billion KRW. This nearly doubled from the previous day's short-selling transaction amount (457.5 billion KRW) and is the largest scale since May 3 last year (829.9 billion KRW), when short-selling, which had been completely banned due to the COVID-19 pandemic, was partially resumed. On that day, institutions dumped sell orders worth about 2.7 trillion KRW in the KOSPI market, of which approximately 437.6 billion KRW were short sales.

Until now, foreign investors overwhelmingly dominated short-selling. According to the trading status for three months after the partial resumption of short-selling announced by the Financial Services Commission last year, foreigners accounted for 76%, while institutions accounted for only 22.1%. However, the previous day's short-selling transaction amount by foreigners was 373.6 billion KRW (45.3%), with institutions surpassing foreigners for the first time. In the KOSDAQ market, short-selling transactions worth about 141.4 billion KRW were made, less than the previous day (162.2 billion KRW).

On the same day, the short-selling transaction ratios were highest in Hanwha Life Insurance (52.29%), Kumho Tire (43.66%), S-1 (33.31%), Hanjin KAL (32.15%), and Dongwon F&B (29.39%). By transaction amount, Samsung Electronics led with 194.2 billion KRW, followed by Samsung Electro-Mechanics (48.5 billion KRW), Doosan Heavy Industries & Construction (21.2 billion KRW), HMM (20.8 billion KRW), and LG Chem (19.8 billion KRW). Notably, Samsung Electro-Mechanics was designated as a short-selling overheated stock, and its stock price plunged by 5.44%.

Since the beginning of this year, the domestic stock market, which fell sharply due to global monetary tightening concerns, has continued its downward trend following Russia's invasion of Ukraine last month, which caused a surge in international oil and commodity prices. The shift to monetary tightening by various countries triggered global inflation, and the recent soaring international oil prices due to the Ukraine war have further fueled inflation. This raises concerns about stagflation, as it could accelerate the U.S. tightening schedule, which has announced interest rate hikes this month, increasing the possibility of an economic recession before full recovery from COVID-19. It suggests that stagflation, which plunged the global economy into turmoil due to the 'oil shock' triggered by the Middle East war in the 1970s, could be repeated.

Researcher Park Sang-hyun of Hi Investment & Securities analyzed, "While price risks have not subsided due to the COVID-19 pandemic impact and structural factors within the U.S., energy price instability caused by the Ukraine conflict is invoking stagflation, represented by the past first and second oil shocks." Researcher Park Sung-woo of DB Financial Investment explained, "(The Ukraine war) increases uncertainty about the peak of inflation in the first quarter of this year and may accelerate economic slowdown," adding, "The sharp rise in energy and food prices will shrink household spending, especially among low-income groups, and historically, rapid increases in crude oil prices have been a factor raising the risk of recession in the U.S."

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