The 'Short Selling Curse' That Has Come to KakaoBank

[Asia Economy Reporter Junho Hwang] The stock price of KakaoBank, which was included in the KOSPI 200 this month, is showing unusual signs. There is no visible effect of capital inflow from being included in the representative stock index, and it has emerged as a target of short-selling forces aiming to profit by exploiting government regulations.

According to Samsung Securities on the 19th, short-selling transactions worth 162 billion KRW, accounting for 34% of the trading volume on the day KakaoBank was included, have been steadily continuing at an average of about 12% per day since then.

Although the proportion of short-selling in the total trading volume can be seen as decreasing, it is analyzed that the short-selling forces are gradually growing. To short-sell, the stock must be borrowed in advance. On the inclusion day, the 10th, the loan balance was 6.94 million shares, accounting for 1.5% of the listed shares. However, this balance has continued to increase, reaching 13.67 million shares as of the 16th. This corresponds to 2.9% of the listed shares and 12.5% based on the floating shares (KRX).

The proportion of short-selling loan balances is also increasing. Comparing KakaoBank’s loan balance and short-selling balance (aggregated reported quantities of short-selling holders with more than 0.01% of listed shares), as of the 14th, the short-selling balance was 2.34 million shares, and the loan balance was 11.5 million shares. It is analyzed that about 20% of the loan balance is being used for short-selling.

The short-selling offensive against KakaoBank is very aggressive even compared to six other stocks that entered the KOSPI 200 through the June regular revision. For the stocks included in June, although they showed a high proportion of short-selling on the inclusion day, they maintained a low short-selling proportion of around 1.7% on average over 20 trading days.

Jeon Gyun, a researcher at Samsung Securities’ Global Investment Strategy Team, analyzed, "Since inclusion, KakaoBank’s price volatility has remained high, linked to the regulatory risks of its parent company, and the short-selling proportion recorded an average of over 12% daily from the 13th to the 16th. Looking at the short-selling trading patterns, we can estimate the sustainability of the short-selling impact."