Short-selling in Korean shares surged to their highest in seven months in May to suggest deepening skepticism on the Korean Inc.
According to Korea Exchange on Monday, the total daily trading value of short-selling transactions on the main Kospi and secondary Kosdaq markets averaged 537.5 billion won ($454.5 million) in May, up 37.1 percent from a month earlier.
Short selling is a legitimate investment scheme that allows investors to borrow shares and sell them immediately on the assumption that share value will go down. Investors later repurchase the shares at a lower price to make profit on difference.
In May, the country’s main Kospi and secondary Kosdaq retreated 7.3 percent and 7.7 percent, respectively. As many as 308 stocks or 14 percent of publicly trading companies touched their 52-week bottoms.
The sharp hike in short-selling transactions is also the result from selling spree by foreign and institutional players as the trade means is limited for retailers.
Foreign investors accounted for a lion’s share of 61.6 percent of the daily short-selling trading volume, averaging 331.3 billion won, the largest in seven months. Institutional investors made up a 37.5 billion percent with 201.5 billion won. Short-selling by retailers comprised of mere 0.9 percent or 4.6 billion won, the second lowest since October.
Of foreign investor’s daily stock trades based on value, 15.6 percent was on short-selling while institutional investors spent 13.9 percent of their investment on short-selling and retail investors 0.1 percent.
By Chung Seung-hwan and Cho Jeehyun
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