Foreigners Increase Futures Selling as Calls to Ban Short Selling Grow

Net Buying of Stock Futures from November 1 to 6... Net Selling After the 7th
KOSPI 200 Still Shows Minimal Impact... KOSDAQ 150 Exhibits 'Backwardation' Trend

Foreign investors have expanded their 'sell' positions in the futures market following the full ban on short selling. It is still too early to make a judgment on index futures. However, a 'backwardation' trend has begun to appear in KOSDAQ150 futures. The balloon effect caused by the short selling ban is expected to be more accurately assessed on the futures expiration date next month (December 14).

According to the Korea Exchange on the 24th, foreign investors net sold 478,377 contracts of stock futures from the first day of the full short selling ban on the 6th until the 22nd. This contrasts with the net purchase of 101,086 contracts from the beginning of this month until just before the short selling ban (1st to 6th).

Looking at the monthly stock futures trading trends, the net selling volume was the largest. The largest net selling volume of stock futures before the short selling ban was in January (333,642 contracts net sold), followed by July (333,035 contracts) and October (274,725 contracts net sold). Considering that this month's data is not yet complete, it can be seen that the net selling trend of stock futures has strengthened after the short selling ban.

A futures manager at a securities firm said, "The balloon effect of the short selling ban appeared in the stock futures market," adding, "Until now, trading in the stock futures market was mainly focused on a few stocks such as Samsung Electronics, but both the variety of items and trading volume have increased."

However, it is pointed out that the 'backwardation' phenomenon, where futures prices are lower than spot prices, should be observed until the futures expiration next month. Generally, futures prices are higher than spot prices, reflecting compensation for future uncertainties and transaction costs.

According to the Korea Exchange information data system, the KOSPI200 futures showed a 'backwardation' phenomenon only on the 16th and 17th. In KOSDAQ150, the phenomenon of futures prices being lower than spot prices was more pronounced. Only on the 10th was there contango (futures prices higher than spot prices), while on all other days, futures prices closed lower than spot prices.

A financial investment industry official explained, "After the futures expiration date next month, prices within the remaining maturity of three months should be checked," adding, "If the backwardation phenomenon is clear, it means that hedging through short selling in the spot market is not possible, so it can be seen as an expansion of sell positions in the futures market instead."