Korean stock market short-selling indicators showed a cooling trend as net short position balances and securities lending volumes declined from recent peaks through late May. Short-selling net positions in the KOSPI market fell to 18.08 trillion won on May 23, down 2.47 trillion won (12.04%) from 20.56 trillion won on May 1, according to Korea Exchange data. The decline reflects reduced bearish positioning amid heightened volatility driven by concerns over AI sector investments and semiconductor technology competition. Market analysts remain divided on whether these declining short-selling metrics signal a market bottom, with some pointing to oversold technical conditions while others cite weak buying momentum and absent institutional support.
Short-Selling Positions and Securities Lending Balances Decline from Recent Peaks
Korea Exchange data showed KOSPI market short-selling net position balances at 18.08 trillion won on May 23, representing a decrease of 4.73 trillion won (20.73%) from the year's peak of 22.82 trillion won recorded on April 1. The KOSDAQ market saw its short-selling net positions fall to 6.24 trillion won on May 23, down 1.98 trillion won (24.07%) from the 2025 high of 8.21 trillion won on April 28.
Securities lending balances, considered a leading indicator of short-selling activity, declined to 151.97 trillion won on May 27 from 180.29 trillion won on May 1, according to Korea Financial Investment Association data. The May 27 figure represented a 43.33 trillion won (22.19%) decrease from the peak of 195.30 trillion won reached on April 15.
The reductions in both short-selling positions and securities lending volumes indicate partial unwinding of bearish positions. Recent market volatility stemmed from concerns over Chinese semiconductor technology independence affecting global chip stocks, rising credit default swap premiums for major AI companies highlighting cash flow concerns from large-scale AI investments, and caution ahead of the Federal Open Market Committee meeting and major corporate earnings announcements.
Analysts Divided on Market Bottom Signals
Yang Hyeong-mo, researcher at DS Investment & Securities, analyzed that 236 out of 282 major Korean stocks (83%) entered the 'death phase' of their price cycles. Including stocks in the 'decline phase,' the proportion exceeded 90%. Yang stated this high percentage of stocks in late-cycle phases serves as a low-point rebound signal, noting that even under a worst-case scenario of 30% earnings per share decline, KOSPI remains undervalued. Yang characterized the current adjustment as a shift in market evaluation criteria toward capital efficiency and profitability rather than the end of the AI investment cycle.
Jo A-in, researcher at Samsung Securities, assessed that while KOSPI entered a technically oversold zone with valuations in historically undervalued territory, the absence of clear buying entities constrains rebound momentum. Jo noted investor deposits decreased from approximately 140 trillion won in early June to 106 trillion won on May 24, with individual investors' additional buying capacity limited after absorbing foreign selling during the initial decline phase. Jo recommended avoiding frequent position changes and responding gradually while monitoring major events, attributing the adjustment to investor sentiment contraction from multiple uncertainties in a liquidity-constrained environment rather than fundamental deterioration.
FAQ
What happened to Korean stock market short-selling positions in May?
Short-selling net position balances in the KOSPI market decreased from 20.56 trillion won on May 1 to 18.08 trillion won on May 23, a decline of 2.47 trillion won (12.04%). Securities lending balances fell from 180.29 trillion won on May 1 to 151.97 trillion won on May 27, a decrease of 28.32 trillion won (15.71%).
Why do analysts disagree on whether Korean stocks reached a market bottom?
Yang Hyeong-mo from DS Investment & Securities points to 83% of major stocks entering late price cycle phases as a rebound signal, while Jo A-in from Samsung Securities notes the absence of clear buying entities and reduced investor deposits from 140 trillion won in early June to 106 trillion won on May 24 as factors constraining recovery momentum.
What caused the decline in short-selling activity in Korean stock markets?
The reduction in short-selling positions and securities lending balances reflects partial unwinding of bearish bets amid market volatility driven by concerns over Chinese semiconductor technology competition, rising credit default swap premiums for AI companies, and caution ahead of the Federal Open Market Committee meeting and corporate earnings announcements.
