Short-Selling Spikes Amid Korean Market Rally: Hedging or Warning Sign?
SEOUL, July 13 (Korea Bizwire) — Short-selling positions in South Korea’s stock markets have surged to their highest levels since the full resumption of short-selling in March, signaling a rise in bearish bets even as local equities continue a months-long rally.
According to data released Saturday by the Korea Exchange, net short interest in the benchmark KOSPI market reached 9.04 trillion won ($6.6 billion) as of July 9 — more than double the 3.92 trillion won recorded on March 31, the day short-selling was reinstated. This marks a staggering 131% increase over a three-month period.
The ratio of short interest to total KOSPI market capitalization rose from 0.19% to 0.35% during the same timeframe. The tech-heavy KOSDAQ market also recorded its highest short balance since March, with 3.93 trillion won in net positions and a market cap ratio rising from 0.52% to 0.96%.
Short-selling, which involves selling borrowed shares in anticipation of a price decline, is widely regarded as a barometer of bearish investor sentiment. A rise in short positions typically reflects expectations of a market downturn.
Among KOSPI-listed firms, chemical and semiconductor materials producer SKC held the highest short-interest ratio at 5.55%. Other heavily shorted stocks included Hanmi Semiconductor (4.92%), Shinsung ENG (3.89%), Hotel Shilla (3.84%), and Doosan Fuel Cell (3.44%).
Bearish Bets Climb as Short Positions in Korean Markets Double (Image supported by ChatGPT)
In the KOSDAQ market, transformer manufacturer Jeil Electric led with a 4.70% short-interest ratio, followed closely by VT (4.67%), Danal (4.52%), and Jeju Semiconductor (4.34%).
Analysts suggest the surge in short interest may reflect a hedge against potential corrections after a sustained 13-week rally, during which the KOSPI index delivered positive weekly returns in all but two weeks since mid-April.
However, some market watchers argue that the bearish outlook may be overextended. With U.S. tariff-related uncertainties easing and global risk appetite gradually returning, there is optimism for continued gains in the Korean market.
This sentiment is further supported by improving fundamentals in several high short-interest stocks, including Hotel Shilla and VT, and growing speculation that foreign investors may soon begin short-covering — buying back borrowed shares — which could fuel additional upside.
“The convergence of the Bank of Korea’s expected rate cut, the government’s supplementary budget, and new market stimulus measures has created one of the most optimistic backdrops in recent memory,” said Byun Jun-ho, an analyst at IBK Investment & Securities. “We expect this momentum to continue into the second half of the year.”
Ashley Song (ashley@koreabizwire.com)
