According to the Korea Exchange, this year’s top 10 short selling target shares in the South Korean stock market during the period of January first to June 29 showed a significant decrease in the number of short sale transactions this month. Specifically, the daily average number dropped 47% in KOSPI and 33% in KOSDAQ until July 11 after the implementation of mandatory public short selling announcement June 30.
For example, the daily average number fell from 89,354 shares to 21,865 shares for Celltrion and from 172,991 shares to 22,645 shares for Hyundai Merchant Marine. Likewise, it dropped by 66.7%, 66.8%, 47.3% and 48.9% in the respective cases of Samsung Heavy Industries, SK Securities, Hotel Shilla and Agabang & Company.
Such a noticeable drop is because institutional investors like foreign hedge funds tried to hide their investment strategies and KOSPI rebounded after Brexit. “It seems that foreign investors’ short covering contributed to the drop as well in view of a decrease in short sale balance led by them,” said researcher Kang Song-chul at Korea Investment & Securities.
Nevertheless, it remains to be seen whether this will continue down the road. The daily average number of short sale transactions in KOSDAQ as a whole increased after the implementation of the mandatory public announcement and short selling is likely to keep occurring depending mainly on individual stock price forecasts.