Foreign Investors Increase Short Selling and Stock Borrowing in KOSPI Market

 
Foreign investors have sold nearly 23 trillion won ($17.3 billion) in net sales in the KOSPI market this month, leading to a rapid increase in short selling and stock borrowing activities. Analysts suggest that the simultaneous rise in cash sales and short selling indicates a growing influence of foreign investors on the domestic stock market.
 
According to the Korea Exchange, foreign investors had net sold over 22 trillion won in the KOSPI market as of June 12. Although they returned to net buying on June 12, they had previously engaged in 23 consecutive trading days of net selling, increasing pressure on the domestic stock market's supply and demand.
 
During this period, short selling transactions also surged significantly. The average daily short selling amount for foreign investors was approximately 2.6 trillion won, a 43% increase from last month's 1.8 trillion won. Compared to 1.1 trillion won two months ago in April, this represents a rise of over 130%.
 
The share of foreign investors in total short selling transactions has also grown. This month, foreign investors accounted for 75.7% of short selling, up 7.5 percentage points from 68.2% last month. Compared to 66.0% two months ago, the increase is even more pronounced. Given that foreign short selling transactions were around 8.6 trillion won at the beginning of the year, the recent growth trend is notable.
 
Foreign investors are also becoming more prominent in the stock borrowing market. Stock borrowing involves investors lending and borrowing shares, often serving as a precursor to short selling.
 
The borrowing balance for foreign investors has risen from approximately 45.9 trillion won in January to about 76.5 trillion won this month, marking an increase of around 66% over five months. While the increase in balance is partly due to rising stock prices, the share of foreign investors in the total borrowing balance has also grown from 47.4% to 53.1% during the same period, indicating expanded participation in the stock borrowing market. Although it cannot be definitively concluded that the increase in borrowing balance directly leads to expanded short selling, some analysts suggest that the surge in short selling transactions aligns with heightened demand for downward bets by foreign investors.
 
Short selling has been concentrated among large-cap stocks in sectors such as semiconductors, IT, and automobiles. This month, the stock with the highest short selling was SK Hynix, exceeding 5 trillion won. Samsung Electronics followed with about 3.5 trillion won, while Hyundai Motor, Samsung Electro-Mechanics, SK Square, and LG Electronics also saw over 1 trillion won in short selling.