KOSPI Short Selling Balance Amount Down 7.4% Over One Week
KOSDAQ Short Selling Balance Amount Down 4.0%
KOSDAQ Short Selling Balance Ratio Exceeds 5-Year Average
Stocks with Earnings Expectations Show Stronger Upward Momentum
It is judged that there has not yet been a significant decrease in short selling balances following the short selling ban, and analysis suggests that only stocks with earnings expectations will experience strong upward momentum.
According to Kiwoom Securities on the 15th, the short selling balance amount in the KOSPI market was recorded at 10.9 trillion won as of the 10th. This is a 7.4% decrease compared to the 11.7 trillion won on the 3rd, the trading day before the short selling ban was implemented. During the same period, the short selling balance amount in the KOSDAQ market decreased by 4.0%, from 6 trillion won to 5.7 trillion won.
Researcher Kim Ji-hyun of Kiwoom Securities explained, "Excluding the 6th, the first day of the short selling ban, when the concentration phenomenon was excessive, the rate of decrease in short selling balances in some stocks after the 7th is interpreted as maintaining short positions betting on a decline." The ratio of short selling balances to market capitalization also remains above the five-year average in the case of KOSDAQ.
Researcher Kim analyzed, "Among the stocks that were ranked high in short selling balance ratios before the ban, those that have not shown a significant decrease in short selling balance ratios so far may continue to experience supply-demand noise," adding, "Most of these stocks have seen a downward trend in the recent one-month change rate of operating profit for the next 12 months." For this reason, the short covering effect was limited to just one day on the 6th.
Conversely, there are stocks that have benefited from the short selling ban, including Krafton, CJ Logistics, Hankook & Company, DoubleU Games, Coway, and HanAll Biopharma.
Researcher Kim diagnosed, "Among stocks with a positive recent one-month change rate in operating profit for the next 12 months, those that have seen a significant decrease in short selling balance quantities compared to before the ban and whose stock prices have risen since the 7th (with cumulative net purchases by foreigners and institutions) are cases where the attractiveness of earnings has been highlighted, and the short selling ban has acted as a buying incentive."
In other words, supply-demand noise is temporary, and the driving force for price increases comes from fundamentals. Researcher Kim said, "Additional short selling is impossible, and at this point when third-quarter earnings are concluding, further upward revisions of earnings estimates are limited," adding, "Among stocks with high short selling balance ratios, those with further earnings improvements next year may experience stronger upward momentum."
He also analyzed, "It is necessary to pay attention to stocks with favorable operating profit forecasts among the top short selling balance ratio stocks as of the 10th, but whose stock prices have declined since the 7th. These include Amorepacific, DB HiTek, OCI Holdings, LG Display, SK Bioscience, and Rainbow Robotics."
He added, "If short selling resumes for all stocks after the short selling system improvement, it could rather act as a supply-demand factor."
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