Korean stock markets saw short-selling and stock lending balances decline sharply this month, according to data from Korea Exchange released on the 27th. KOSPI short-selling balance fell 17.10% this month to 16.8492 trillion won as of the 22nd, while KOSDAQ short-selling balance dropped 10.52% to 5.8586 trillion won. Stock lending balance, considered a leading indicator for short-selling, decreased 16.34% this month to 148.8825 trillion won as of the 24th. The declines follow extreme market volatility, with KOSPI down 20.30% and KOSDAQ down 16.52% this month amid semiconductor peak concerns, Middle East tensions, and interest rate hike fears. Analysts interpret the reduction in short positions as evidence that investors now view further downside as limited after the sharp correction.
KOSPI and KOSDAQ Short-Selling Balances Decline Sharply
According to Korea Exchange, KOSPI short-selling net balance stood at 16.8492 trillion won as of the 22nd, down 3.4761 trillion won (17.10%) this month. Compared to the record high of 22.8164 trillion won on the 1st of last month, the balance has decreased nearly 6 trillion won in a month and a half.
KOSDAQ market showed a similar trend. KOSDAQ short-selling net balance was 5.8586 trillion won as of the 22nd, down 686.6 billion won (10.52%) this month.
Stock Lending Balance Drops 16.34% This Month
Stock lending balance, regarded as "ammunition" for short-selling, also declined. According to Korea Financial Investment Association data, stock lending balance stood at 148.8825 trillion won as of the 24th, down 29.0894 trillion won (16.34%) this month. Stock lending balance reached a record high of 195.3006 trillion won on the 15th of last month, approaching 200 trillion won, before declining.
Stock lending is a transaction where foreign or institutional investors lend shares to other investors for a fee, and is considered a leading indicator for short-selling. The decline in stock lending balance means potential selling volume that could convert to short-selling is decreasing, indicating that bearish market bets have eased.
Analysts Cite Excessive Correction and Valuation Opportunities
The brokerage industry expects Korean stocks to gradually recover, as they have entered an excessively undervalued phase. Heo Jae-hwan, researcher at Eugene Investment & Securities, stated, "Because the short-term stock price decline is unusual, downward pressure on Korean stocks will gradually subside. However, the possibility of interest rate hikes is high, and doubts about the sustainability of capital expenditure due to big tech's profit margin slowdown and cash flow deterioration continue, so stock price recovery will take time."
Han Ji-young, researcher at Kiwoom Securities, noted, "KOSPI forward price-to-earnings ratio (PER) is below 6, showing high valuation attractiveness. As we have entered the mid-term bottom range from valuation and technical perspectives, the key is how much rebound energy can be secured through major domestic and international events scheduled this week."
Han added, "Last week, both Alphabet and Intel confirmed strong earnings and capital expenditure increases, but concerns about cash flow deterioration due to large-scale investments spread, acting as a negative factor for semiconductor stocks. Ultimately, the center of gravity determining semiconductor stock prices is shifting to customer profitability, so it is necessary to monitor whether indicators such as cash flow and operating profit margin improve."
Big Tech Earnings This Week to Determine Market Direction
This week is expected to be a major turning point for Korean stocks, as big tech earnings announcements are concentrated. Microsoft, Meta Platforms, Apple, and Amazon.com are scheduled to report earnings this week. Earnings announcements from domestic leading stocks such as Samsung Electronics and SK Hynix are also scheduled.
FAQ
Q: Why did short-selling balances in Korean stocks decline sharply this month?
A: According to Korea Exchange data released on the 27th, KOSPI short-selling balance fell 17.10% this month to 16.8492 trillion won as of the 22nd, and KOSDAQ short-selling balance dropped 10.52% to 5.8586 trillion won. Stock lending balance also decreased 16.34% this month to 148.8825 trillion won as of the 24th. The declines occurred after extreme market volatility, with KOSPI down 20.30% and KOSDAQ down 16.52% this month. Analysts interpret the reduction as evidence that investors now view further downside as limited after the sharp correction.
Q: What do analysts say about Korean stock market valuation after the recent decline?
A: Han Ji-young, researcher at Kiwoom Securities, stated that KOSPI forward price-to-earnings ratio (PER) is below 6, showing high valuation attractiveness, and that Korean stocks have entered the mid-term bottom range from valuation and technical perspectives. Heo Jae-hwan, researcher at Eugene Investment & Securities, stated that downward pressure on Korean stocks will gradually subside because the short-term stock price decline is unusual, but added that stock price recovery will take time due to interest rate hike possibilities and doubts about big tech's profit sustainability.
Q: Which major earnings announcements are scheduled for this week?
A: This week, Microsoft, Meta Platforms, Apple, and Amazon.com are scheduled to report earnings. Earnings announcements from domestic leading stocks such as Samsung Electronics and SK Hynix are also scheduled.
