As short selling resumes, the secondary battery and bio sectors with high borrowing balance ratios have collapsed. Borrowing refers to the act of an investor borrowing stocks from institutions, which is a necessary step before short selling. Thus, a borrowing balance does not necessarily indicate the total potential short-selling volume, but it is an indicator that indirectly shows the expected short-selling trends.
On the 31st, Ecopro finished trading at 49,650 won, a drop of 12.59% from the previous day. Additionally, other secondary battery stocks such as ECOPRO BM (-7.05%), POSCO FUTURE M (-6.38%), Ecopro Marty (-6.40%), LG Energy Solution (-6.04%), LG CHEM (-5.41%), SK Innovation (-4.55%), Samsung SDI (-4.16%), and POSCO Holdings (-4.62%) also plummeted.
Coincidentally, these stocks are among the corporations with high borrowing balance ratios. On the 28th, before short sales resumed, ECOPRO BM's borrowing balance ratio was 15.15%. Ecopro was at 12.62% and POSCO FUTURE M was relatively high at 8.05% compared to other stocks.
Secondary batteries are also facing worsened performance due to short selling, which could lead to further declines in stock prices. Jung Jin-soo, a researcher at Heungkuk Securities, analyzed that "the performance of the secondary battery sector in the first quarter is likely to worsen compared to the previous quarter due to ongoing inventory adjustments by major customers."
In particular, KOSDAQ stocks are expected to be more significantly affected by the resumption of short selling. Stocks with larger market capitalizations that have trading demand in the market have individual stock futures listed as an alternative to short selling, but KOSDAQ stocks often do not.
Not only secondary batteries but also the pharmaceuticals and bio sectors showed weakness with stocks having high borrowing balance ratios. HLB, with a borrowing balance ratio of 8.50%, fell by 3.67% that day. CHA Biotech, with a 11.40% ratio, dropped by 2.70%, and Sam Chun Dang Pharm, with a borrowing balance ratio of 5.50%, fell by 2.37%.
In response, the securities industry advised caution with stocks where borrowing balances have risen or foreign ownership ratios have increased. Kim Ji-hyun, a researcher at DAOL Investment & Securities, noted that "it is inevitable that volatility will increase as the short-selling balances revert to average levels," adding that "a defensive strategy may be effective for buying in high market capitalization sectors such as semiconductors, banking, and capital goods."