The balance of stock lending transactions, seen as a leading indicator for short selling, is rising again. Recently, loan balances have piled up mainly in large-cap semiconductor stocks, but the ratio to market capitalization has inched up only slightly, leading some to say it is hard to view it as a full-fledged bet on a decline.
According to the Korea Financial Investment Association on the 11th, as of the 8th the balance of stock lending transactions was 117.8266 trillion won, the record high since the 17th of last month. After holding in the 100 trillion won range since September this year, the loan balance had surged to 125.6193 trillion won on the 3rd of last month.
Stock lending is the act of lending shares and is a prerequisite for short selling, in which the borrowed shares are sold first and later bought back cheaper to repay. In the domestic market, where naked short selling is banned, the view that loan balances are a leading indicator of short selling is prevalent, and in fact short-selling transaction value also showed an uptrend this month, rising from 671.5 billion won to 819 billion won.
Unlike last month when the KOSPI slid to the 3,800 level and the loan balance shrank by more than 1.5 trillion won in three weeks, the index rebounded 5.81% in Dec., reclaiming the 4,000 level, and loan balances are also increasing quickly.
In particular, large-cap semiconductor stocks ranked among the top names in stock lending transactions. From the 1st to the 8th of this month on the main board, Samsung Electronics ranked No. 1 in loan balance (12.41 trillion won), SK hynix ranked No. 2 (11.11 trillion won), and HANMI Semiconductor ranked No. 6 (1.7 trillion won). During the same period, Samsung Electronics and SK hynix rose 8.96% and 8.87%, respectively, outpacing the KOSPI's 5.81% gain.
However, experts advise that despite the absolute increase in stock lending balances, it is hard to regard this as a bearish bet. To gauge actual bearish positioning, the ratio of loan balance to market capitalization must be considered; at the end of last month Samsung Electronics' ratio ticked up from 1.8% to 1.9% on the 8th, while SK hynix rose from 2.3% to 2.6%, only a slight increase.
An official in the securities industry said, "It is true that the stock lending balance for large-cap semiconductor stocks has increased, but market capitalization also rose as share prices climbed during the same period," and added, "Rather than increased demand for short selling aimed at a price drop, it is more likely that transactions for hedge (risk avoidance) purposes increased."