Short selling investors saw their profits surge due to a recent decline in stock prices caused by a trade dispute between the United States and China.
The prices of the 10 stocks, which showed the biggest proportion of short selling in total transactions between May 2 and 16, all dropped over the same period, according to Korea Exchange (KRX) on May 19.
Short-selling allows investors to profit from stocks or other securities when they go down in value. In order to do a short sale, an investor has to borrow the stock or security through their brokerage company from someone who owns it. The investor then sells the borrowed share to buyers willing to pay the market price. He or she hopes that the price will fall over time, providing an opportunity to buy back the stock at a lower price than the original sale price to return the borrowed stock.
Since most investment in short selling was made by foreigners and institutional investors, individual investors rarely made a profit.
The total amount of short stock sales by individual investors in the South Korean stock market, including both the KOSPI and the KOSDAQ, came to 332.70 billion won (US$278.29 million) in the first quarter of this year, accounting for only 1.3 percent of the total of 25.24 trillion won (US$21.11 billion). On the other hand, the proportion of foreign investors in short sales stood at 65 percent, while that of institutional investors was 33.7 percent.