The Number of Short Selling Overheated Stocks Is Also Decreasing
In the month following the full resumption of short selling, the average daily trading value of KOSPI and KOSDAQ stabilized at around 800 billion won. However, the anticipated effect of foreign investors returning to the market did not materialize, as foreigners sold nearly 10 trillion won worth of shares.
According to the Korea Exchange on the 4th, the total value of short selling transactions on KOSPI and KOSDAQ reached 20.3649 trillion won from March 31, when short selling was resumed, to May 2, covering just over a month.
The average daily value of short selling transactions stood at 848.5 billion won, representing an increase of about 8% compared to the average daily value of 788.4 billion won during the month prior to the full ban on short selling (October 4 to November 3, 2023). On the first day of resumption, March 31, the value of short selling transactions was 1.7289 trillion won, but by May 2, it had decreased to around 627.2 billion won. While the figure hovered above 1 trillion won at the beginning of last month, it stabilized downward to the 600 to 700 billion won range by the end of the month.
Despite the resumption of short selling and the shock from U.S.-imposed tariff policies, the domestic stock market has remained resilient. The KOSPI index rose slightly from 2,557.98 on March 28, the day before short selling resumed, to 2,559.79 on May 2. The KOSDAQ index increased by about 4%, from 693.76 to 721.86.
During the 24 trading days following the resumption of short selling, the number of stocks designated as short selling overheated stocks reached 360, but this number is now on a downward trend.
On the 8th, dealers are working in the dealing room of Hana Bank in Jung-gu, Seoul, where the KOSPI index showed a rebound of nearly 2% in the early session, recovering from the sharp decline the previous day. April 8, 2025. Photo by Kang Jinhyung
On the first day, March 31, 43 stocks were designated as short selling overheated stocks, but by April 30, a month later, the number had dropped to 17. Starting this month, the criteria for designating short selling overheated stocks have been eased, so the number of designated stocks is expected to decrease further.
However, the lack of improvement in the supply and demand of foreign investors, who are at the center of short selling transactions, remains an issue. Over the past month, the share of short selling transaction value by foreigners was 85.12%, far exceeding that of institutions (13.66%) and individuals (1.22%).
Initially, there were expectations that the resumption of short selling would prompt foreign capital, which had previously flowed out, to return to the domestic stock market. However, foreigners sold more than 9 trillion won worth of KOSPI shares last month, marking the largest net selling volume in over five years since March 2020, during the COVID-19 crisis.
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