Short-selling investors are diligently repurchasing stocks ahead of the year-end. This is a move to realize a profit before the start date of the dividend. Stocks with a large short-selling balance are showing a sharp rebound in recent years due to the inflow of foreign buying through short covering (repurchase purchases).
According to the Korea Exchange on the 7th, the number of short selling stocks in the KOSPI market on the 2nd was 267.73 million shares, a decrease of 6.6% from 267.73 million shares on the 25th of last month, a week ago.
The amount of short selling balance was relatively small. During the same period, the short selling balance decreased only 2.7% from 10.62 trillion won to 9,795.1 billion won. During this period, the KOSPI index fell slightly from 2980 to 2945. This means that stocks with high short-selling stocks were relatively strong.
Daewoo Shipbuilding & Marine Engineering (DSME) is the stock with the largest decrease in the short selling balance over the past week. The short selling balance of this stock fell by 57.7 billion won from 74 billion won to 16.3 billion won. It was followed by LG Display (54.7 billion won ↓), Fila Holdings (49.1 billion won ↓), NAVER (38 billion won ↓) and SK Innovation (34.5 billion won ↓).
The balance sheet, which has a strong nature of short-selling waiting funds, is also trending down after peaking. The balance from 1.706 trillion won at the end of August increased to 1.190.3 trillion won on the 17th of last month, but the increase has slowed to 1.1628 trillion won on the 3rd.
At the end of every year, the balance of the loan declines sharply and there is a clear tendency for short selling to be repaid. Short sellers pay a kind of commission to the original stock holders when borrowing stocks, because they have to pay additional dividends when the year-end dividend record date passes. Because of this, the stock price has fallen sharply, so it is common for short selling stocks that have already made significant profits from short selling and have high potential for year-end dividends.
As short-covering funds from short-selling investors flowed in, the stock prices of these stocks are also showing strength. Since this month, Daewoo Shipbuilding & Marine Engineering is rising 8.66%, LG Display 12.31%, Fila Holdings 6.29%, NAVER 2.49%, and SK Innovation 4.11%.
Kim Kyung-hoon, a researcher at KTB Investment & Securities, said, “If we compare the average short selling amount of this year until the end of October, just before foreign net buying, and the cumulative foreign net buying since November, it matches 70% or more. It means that it is a short-covering pattern that is currently in progress,” he said.
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