As the KOSPI rebounded to the 7,200 level after plunging to as low as the 6,000 level amid days of steep declines, the supply-demand environment is improving, with margin debt and short selling declining and a large-scale shift in holdings between individual and foreign investors. Analysts say the “toxic overhang” that had accelerated the index’s decline has been absorbed and standby funds are flowing in, giving the market the strength to return to a full-fledged upward rally.
The Kospi, won-dollar exchange rate, and share prices of SK hynix and Samsung Electronics are displayed on a status board at Hana Bank’s dealing room in Jung-gu, Seoul, on Dec. 15, as the Kospi surged to reclaim the 7,000 mark. The Kospi closed at 7,284.41, up 427.58 points (6.24%). Reporter Cho Tae-hyung
According to the Korea Exchange (KRX), the KOSPI closed at 7,284.41 on the 15th, up 427.58 points, or 6.24%, from the previous trading session. This followed a rebound after searching for a bottom around the 6,800 level over the prior two days. Margin loan balances also fell as the index headed toward its bottom. According to the Korea Financial Investment Association, the balance of margin loans stood at 34.7077 trillion won as of the 14th. This is a 9.9% decrease from 38.5312 trillion won on June 22, when the KOSPI hit its peak.
While margin balances in the KOSPI market fell 6.8% from 29.4707 trillion won to 27.4527 trillion won, balances in the KOSDAQ market plunged 19.9% from 9.0605 trillion won to 7.255 trillion won. Analysts interpret this as showing that the overheated margin trading has largely cooled, as the persistently sluggish KOSPI market underwent a further correction and individual investors carried out large-scale liquidation of their leverage.
The stock-lending balance, called the reserve funds for short selling, is also on a downward curve. The stock-lending balance, which reached 195.3005 trillion won on June 15, steadily declined to 153.484 trillion won as of the 14th. This represents a 21.4% decrease in about a month, meaning the burden of potential selling volume that could weigh on the market has eased.
Investor deposits, called the “ammunition” for entering the market, halted their decline and rebounded. Investor deposits hit a record high of 139.6947 trillion won on June 4, then fell continuously through July 10 to 105.5757 trillion won, a 24.4% decrease. This raised concerns at one point that deposits could fall below 100 trillion won, but they rose again to 111.2825 trillion won on the 14th as the market rebounded, which analysts see as evidence of a recovery in investor sentiment.
Positive signals are also continuing on the supply-demand front. Foreign investors, who had maintained a “sell” stance this year, entered en masse targeting the lows, while individuals sold to realize profits, resulting in a large-scale shift in holdings. Foreigners net-bought 343.7 billion won on the 8th, 134.3 billion won on the 9th, and 956.5 billion won on the 14th, before explosively expanding their buying to 2.3227 trillion won on the 15th. In contrast, individuals sold a total of 7.9727 trillion won over the same period, handing over the initiative to foreigners and institutions.
Securities analysts expect the across-the-board improvement in the supply-demand environment to lead a full-fledged recovery in the market in the second half. They assess that the current supply-demand structure, in which foreign investors’ leading buying is flowing in amid reduced market volatility risk from shrinking margin balances, will firmly support the index’s downside. Kang Jin-hyuk, a researcher at Shinhan Investment Corp., said, “A buy sidecar was triggered by the combined buying of foreigners and institutions, spreading warmth.” He added, “Going forward, the market’s attention will gradually shift to corporate earnings, confirming the sustainability of the bull market.”
