[Asia Economy Reporter Myunghwan Lee] Ahead of the year-end dividend season, securities industry experts have advised paying attention to stocks with a high proportion of loan balance. This is because these stocks can benefit from 'short covering,' which involves repurchasing borrowed shares to repay short-sold stocks.
According to the Korea Financial Investment Association on the 24th, as of the previous day, the loan balance amount in the domestic stock market was recorded at 74.3335 trillion KRW. This exceeds the recent three-month average loan balance amount of 67.8547 trillion KRW. On the same day, the number of shares on loan was 2.14651 billion shares, also surpassing the three-month average of 2.023 billion shares.
The loan balance, which had steadily increased until the end of this month, is expected to decrease as the year-end approaches. This is due to the possibility of loan balance repayment related to year-end dividends and voting rights exercise at shareholders' meetings. The loan balance refers to the quantity of shares borrowed by investors that have not yet been returned and is recognized as short-selling standby funds after borrowing shares and selling them.
In fact, the proportion of loan balance has shown a decreasing trend at the end of each year. Kyobo Securities examined changes in the loan balance proportion in the KOSPI market from the end of November to the end of December last year and found that the proportion decreased by 1.04 percentage points during this period. This year-end decrease in loan balance proportion has been observed annually since 2014.
As the loan balance decreases, the stock prices of the corresponding stocks have often risen. As of the end of November last year, among the top 50 stocks with the highest loan balance proportion, 31 stocks recorded returns higher than the KOSPI index. This trend has appeared several times in the past; in 2018, 28 out of the top 50 stocks by loan balance proportion outperformed the index.
Minseok Kang, a researcher at Kyobo Securities, advised, "This year, the loan balance proportion of the KOSPI was 5.78%, an increase of 1.71 percentage points compared to the beginning of the year. There may be repayment pressure corresponding to the increased loan balance proportion."
Meanwhile, as of the 21st, stocks with a high loan balance proportion included Lotte Tour Development (32%), SK Bioscience (24%), Doosan Fuel Cell (22%), Hotel Shilla (22%), AmoreG (20%), Meritz Financial Group (20%), and Daewoo Shipbuilding & Marine Engineering (20%).
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