The KOSPI index, which had plunged, rebounded, recovering to the 5,700–5,800 range. But concerns are growing that the market could replay a "roller KOSPI" pattern of another steep dive. In particular, with short-sale balances that bet on a downturn piling up rapidly, some analysts say stock price volatility could increase if the market enters a full-fledged correction phase.
According to the Korea Financial Investment Association on the 20th, domestic stock market stock-lending balances reached 154.0241 trillion won as of the 18th, hitting an all-time high. The balance, which stood at 147 trillion won on the 17th, surged by about 7 trillion won in just one day. This is seen as a sign that investor sentiment to bet on a decline, wary of the possibility of further market adjustment, has reached a peak.
A stock-lending transaction is a transaction in which an investor who holds shares lends them to another investor for a fee. Because borrowed shares are used as the key "ammunition" for short selling, which sells the borrowed shares into the market, the trend in lending balances is interpreted as a decisive leading indicator for gauging future short-sale supply. Since short selling typically involves borrowing shares to sell high when a price drop is expected and buying them back at the bottom to return them, a record-level lending balance can be a time bomb that increases downward pressure on the market.
Short-sale positions that will act as direct selling pressure in the market are also surging. On the 16th, net short positions on the main board reached 1.537 trillion won, up about 6% from early this month. That is a record high over the past year. Net short position refers to shares that investors borrowed and sold but have not yet bought back to return. The fact that this balance has piled up to record levels is interpreted as evidence that investor sentiment expecting future stock declines is that much stronger.
The stock with the largest net short position was Hyundai Motor at 1.6824 trillion won, followed by HANMI Semiconductor at 1.3257 trillion won. As of the previous day, five stocks had a short-selling share exceeding 30% of total transaction value, and among them, Yungjin Pharm had a short-selling share of 41.5%. Of the 1.18318 billion won in transaction value, 492 million won came from short-selling transaction value.
The number of designations for short-selling overheating stocks is also increasing. This month, 71 stocks on the main board were designated as short-selling overheating stocks, nearly double the 35 designations in January–February, by mid-month.
Experts say that as the domestic stock market has surged this year, volatility driven by war has increased, leading more players to bet on a market decline.
Lee Hyo-seop, a research fellow at the Capital Market Research Institute, said, "As market capitalization has increased, the short-selling share has relatively risen as well," and noted, "It also appears that foreign hedge funds are taking short positions (sell strategies) due to recent perceptions of a market top."
Lee said, "Some forces betting on a stock decline are showing up as short-selling balances, and because there are many such heterogeneous players, market volatility is increasing."
Experts warn that a surge in short-sale supply could become a trigger that amplifies market volatility.
Yang Jun-seok, an economics professor at Catholic University, analyzed, "Short selling has the advantage of accelerating price adjustments and improving market efficiency, but its side effects of overreacting beyond intrinsic value and amplifying volatility are significant." Yang added, "If price declines driven by short selling are exaggerated, the damage to the market could grow uncontrollably," and advised, "In particular, note that short selling has no lower bound on the scale of potential losses, making its investment risk extremely high."