'Record High Short Selling Transaction Amount' Concerns Over 72 Trillion Loan Balance Bomb in Q2

[Image source=Yonhap News]

[Asia Economy Reporter Lee Seon-ae] In the first quarter of this year, the short-selling transaction amount in the domestic stock market recorded the highest quarterly figure ever, and it is expected to continue its upward trend in the second quarter. This is because the loan balance, which represents the funds waiting for short selling, has consistently remained in the 72 trillion won range since April. For stocks with a sharp increase in short selling, investor sentiment tends to freeze rapidly, which is a negative factor. Accordingly, the securities industry advises paying attention to sectors and stocks that show a 'short-selling liquidation' signal, where the intensity of short selling decreases simultaneously with a reduction in loan balances.

According to the Korea Exchange on the 11th, the short-selling transaction amount in the KOSPI market for the first quarter of this year was 29.9549 trillion won, marking the highest quarterly figure since statistics began in May 2017. Compared to 16.3842 trillion won in the fourth quarter of 2019, just before short selling was banned due to the COVID-19 pandemic, the amount nearly doubled. The daily average short-selling transaction amount in KOSPI for the first quarter was 507.7 billion won, surpassing the daily average of 427.9 billion won recorded since the partial resumption of short selling in May last year.

The securities industry expects the short-selling transaction amount to continue its increasing trend in the second quarter without turning to a decline. This is because the loan balance has remained in the 72 trillion won range since April. As of the most recent available data on the 8th, the loan balance was recorded at 72.4341 trillion won. On the 4th, it even surged to 72.9167 trillion won, nearly breaking through 73 trillion won. Compared to 48 trillion won at the end of April last year, when short selling was banned, this represents an increase of over 20 trillion won.

Currently, most of the top short-selling stocks also have large loan balances. This indicates a high likelihood that short selling in these stocks will continue in waves. Therefore, experts recommend focusing on stocks where both the intensity of short selling and the loan balance decrease simultaneously starting from the second quarter.

Researcher Kim Kwang-hyun of Yuanta Securities stated, "Short-selling orders can be distinguished from sell orders, so it is possible to aggregate short-selling volumes, but buy-to-cover (short cover) orders cannot be separately distinguished from buy orders, so the exact figures are unknown." He added, "It is possible to get hints through changes in short-selling balances and loan balances, but short-selling balances are only reported when they exceed 0.01% of the listed shares, so there is some discrepancy from the actual figures." He further explained, "What can be used instead of short-selling balances is the change in short-selling intensity. Even a decrease in short-selling intensity can be expected to improve supply and demand. An improvement in supply and demand means that the fundamental importance of the stock increases."

He pointed out the need to pay attention to the fact that many secondary battery stocks and reopening-related stocks have recently seen a decrease in short selling. If these stocks also show a simultaneous decrease in loan balances, it can be inferred that short-selling transactions in those stocks are being liquidated. This possibility is especially high for stocks that have recently experienced price increases.

Based on the Universe 200 stocks, comparing from March to the first week of April, short selling decreased in secondary battery and reopening-related stocks such as L&F, EcoPro BM, Hotel Shilla, OCI, KEPCO KPS, CS Wind, LG Innotek, Modetour, CJ CGV, POSCO Chemical, SK IE Technology, Pearl Abyss, Fila Holdings, Daewoo Construction, and Hanatour. Among these, loan balances for L&F, OCI, Modetour, CJ CGV, POSCO Chemical, SK IE Technology, and Pearl Abyss decreased between March 25 and April 4.

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