"No Impact from Short Selling Resumption"... KOSPI and KOSDAQ Both Rise in Morning Session

On the first day of the partial resumption of short selling on the 3rd, the KOSPI index is displayed on the electronic board in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Minji Lee] Although short selling partially resumed after 13 months, it does not appear to have changed the direction of the KOSPI. In the early session, the KOSPI and KOSDAQ indices showed weakness but are now rising due to net buying by institutions and individuals. Securities experts expect the upward trend to continue as corporate earnings show clear improvement.

As of 10:19 a.m. on the 3rd, the KOSPI stood at 3,174.09, up 0.83% (26.23 points) from the previous trading day. The KOSPI opened at 3,149.05, up 0.04% (1.19 points) from the previous day. Looking at investor trends, individuals and institutions bought stocks worth 34 billion KRW and 123.2 billion KRW respectively, while foreigners sold stocks worth 162 billion KRW.

By sector, insurance (4.14%), transportation equipment (2.93%), telecommunications (1.16%), steel (1.23%), and food and beverages (0.98%) showed gains. Among insurance companies, Samsung Life Insurance (7.4%), Samsung Fire & Marine Insurance (3.5%), Lotte Insurance (2.9%), and Heungkuk Fire & Marine Insurance (2.6%) led the rise.

Among the top market capitalization stocks, Samsung Electronics rose 0.74% to 82,100 KRW compared to the previous day. SK Hynix (2.34%), NAVER (2.23%), Kakao (2.23%), Hyundai Motor (3.30%), Kia (4.03%), and POSCO (1.65%) also showed upward trends.

At the same time, the KOSDAQ index stood at 986.02, up 0.26% (2.57 points) from the previous day. The KOSDAQ opened at 982.97, down 0.05% (0.48 points), continuing its weakness but reversed to an upward trend due to net buying by individuals. Investor trends show individuals and institutions bought stocks worth 26 billion KRW and 470 million KRW respectively, while foreigners alone sold stocks worth 19.7 billion KRW.

By sector, construction (1.86%), food and tobacco (1.54%), software (1.28%), and information devices (1.18%) maintained gains. Most of the top market capitalization stocks showed declines. Celltrion Healthcare (-1.60%), Celltrion Pharm (-0.98%), Kakao Games (-1.85%), EcoPro BM (-1.16%), and Pearl Abyss (-0.35%) also fell.

Securities Industry: “Expect Strengthening of KOSPI Uptrend”

The KOSPI uptrend is likely to continue. Although the pace of index gains feels slow amid historically loose liquidity conditions, corporate earnings forecasts are being revised upward thanks to a faster-than-expected global economic and trade recovery.

There is also a strong possibility of further improvement in earnings forecasts following the first-quarter earnings announcement period of domestic companies. Not only this year but next year’s earnings forecasts are being sharply revised upward, and the 12-month forward earnings per share (EPS) is showing an upward trend. Seojung Hoon, a researcher at Samsung Securities, explained, “The rising prices of raw materials and intermediate goods, along with the continued increase in inventory accumulation demand, will further boost the earnings outlook for domestic companies.”

Furthermore, net buying by foreigners is expected to support the KOSPI’s rise. As concerns over a resurgence of COVID-19 in Europe ease and expectations for economic recovery grow, the euro is expected to strengthen while the dollar weakens. If the Korean won continues to strengthen, the inflow of foreign net buying is likely to persist.

Lee Kyung-min, a researcher at Daishin Securities, said, “Although the resumption of short selling may cause some disruption to investor sentiment and supply-demand factors, it is expected to have a positive impact from the foreign investor perspective,” adding, “With the resumption of selling, various types of global funds such as active funds, hedge funds, and long-short funds can flow in.”