The short selling force, which gives the domestic stock market trouble, has recently let up. In particular, expectations are growing that Samsung Electronics Co., which had been a main target of short sellers, will be able to see its share price go up as the balance of stock lending, which hit a record high after the company’s stock split, drastically decreased.
According to data from Securities Information Portal (SEIBro) of the Korea Securities Depository on Aug. 30, the total balance of stock lending on the domestic stock market this month came to 53.48 trillion won (US$48.16 billion) as of the closing price a day earlier. The figure went down by 13.4 percent after reaching an all-time high in May at 61.75 trillion won (US$55.6 billion). A balance of securities lending is the amount of shares that investors borrowed and not paid back. It is considered a leading indicator of short sale growth because shares lent can be used in short sale transactions. When the amount of short sale increases, the share price of a company is forced to go down.
The amount of stock loan transactions on the domestic market reached 27.25 trillion won (US$24.53 billion) in May but it continuously decreased to 20.9 trillion won (US$18.82 billion) in June, 18.77 trillion won (US$16.9 billion) in July and 16.41 trillion won (US$14.77 billion) in August. This can be seen as the short selling force, which bet on the bear market, has lessened.
Particularly, the stock price of Samsung Electronics, which had been mainly targeted by the short selling force, gradually is levelling off. When the price of Samsung Electronics shares dropped after the stock split on May 4, its short sale aiming for a growing number of individual investors surged. Samsung Electronics ranked first in terms of short sale on the main KOSPI bourse, though it had never been on the top 100 list in short sale before the stock split.
Market experts said that Samsung Electronics has become an “ant tomb” as individual investors, who bought its shares after the stock split, suffered a loss due to a sharp drop in stock prices caused by a rapid increase in short sale. Despite the fact that Samsung Electronics is expected to post the highest-ever annual profits and make a large-scale investment this year, its stock price fell from 51,900 won (US$46.74) on May 4, the day of the stock split, to 43,500 won (US$39.17) on Aug. 20, hitting a 52-week record.
However, the price of Samsung Electronics shows a rebound trend again as short sales have greatly reduced. The number of Samsung Electronics’ securities lent decreased from 130 million shares in May to 9,192 shares this month. The percentage of the company’s short sale in total, which reached the highest of 25.6 percent on May 11, dropped to 5.2 percent a day ago. This is because the number of short selling investors, who bet on the bear market, went down as it has been accepted that the price of Samsung Electronics stocks hit the bottom. The company’s plunging stocks price is gradually rebounding as short sales have decreased. The price of Samsung Electronics shares increased nearly 10 percent on the same day in nine trading days after recording a 52-week low.