On expectations that the Iran war will end, foreigners turned net buyers in the KOSPI market in April. However, as the net short position balance hit a record high and the securities lending transaction balance also increased rapidly, caution is growing in the market over potential downside pressure.
According to the Korea Exchange (KRX) on the 15th, foreigners made net purchases of about 5.3728 trillion won in the stock market from Apr. 1 to 14. This contrasts with consecutive net selling in February (21.0731 trillion won) and March (35.8806 trillion won). With tensions in the Middle East easing somewhat, expectations for improved corporate earnings appear to be reflected.
However, the fact that the net short position balance in the stock market hit a record high during the same period is adding to market caution. As of the 10th, the net short position balance amounted to about 16.9279 trillion won. After topping 16 trillion won for the first time on the 25th of last month, it again broke into the 16 trillion won range on the 8th.
Short selling is an investment technique in which an investor sells borrowed shares without owning them first, then buys them back at a lower price if the stock falls to capture the price difference. The net short position balance is the remaining amount after an investor sells borrowed shares, and it is generally interpreted as an indicator reflecting expectations of a market decline.
The securities lending transaction balance, viewed as a leading indicator for short selling, is also swelling. According to the Korea Financial Investment Association, the securities lending transaction balance on the 14th was 156.0291 trillion won. That is an increase of nearly 23 trillion won from the end of last month (133.5739 trillion won). Because securities lending transactions represent potential supply that could lead to future short selling, they are cited as a factor weighing on the market.
Ahn Dong-hyun, a professor in the Department of Economics at Seoul National University, said, "War risk is ongoing and the net short position balance is also high, so it is difficult to judge the recent foreign buying as a structural shift in supply and demand," and noted, "In a rising phase, short covering (closing short positions) could occur, further amplifying volatility in the domestic stock market."
However, a short position balance does not necessarily act only as downward pressure. If stock prices rebound contrary to expectations, short covering, in which short sellers quickly buy back shares to limit losses, can flow in. The strong buying that occurs in this process can instead help drive an additional rally in the stock market.
Meanwhile, the stocks that foreigners bought the most on a net basis in the stock market this month were SK hynix and Samsung Electronics. Foreigners made net purchases of 2.8728 trillion won and 1.9608 trillion won, respectively.
In the stock market, HANMI Semiconductor had the highest net short position balance. As of the 10th, HANMI Semiconductor's net short position balance was 1.7973 trillion won. Hyundai Motor (1.7276 trillion won), LG Energy Solution (1.2474 trillion won), and Mirae Asset Securities (873.3 billion won) followed.