Short Sellers Smile at the 'Panic Sell-Off' as Top Stocks Post Paper Gains [fn Market Watch]

[Financial News] As the domestic stock market has seen a sharp sell-off this month, resembling a 'panic sell,' short sellers are estimated to have booked sizable paper gains. Over the past week, most of the top stocks targeted by short selling fell below their average short-sale prices, producing double-digit paper returns based on the average entry price.
According to the Korea Exchange and Daishin Securities on the 30th, eight of the 10 stocks with the highest short-selling trading ratios over the past week (July 21-28) fell below their average short-sale prices, excluding Cheil Worldwide and Yuhan Corporation. Short selling is an investment strategy in which investors borrow shares and sell them first, then buy them back later at a lower price if the stock falls, pocketing the difference.
The stock with the highest short-selling ratio was Korean Aerospace Industries (KAI), with short sales accounting for 34.3% of total trading volume. It was followed by Hanmi Semiconductor at 31.1%, LG Display at 30.13%, Cheil Worldwide at 28.19%, KEPCO Plant Service & Engineering at 27.42%, Hanil Cement at 26.22%, POSCO DX at 25.04%, Yuhan Corporation at 24.73%, L&C Bio at 24.48%, and Fine M-Tec at 24.39%.
Korean Aerospace Industries' average short-sale price over the past week was 152,094 won. Given that its current share price is around 120,000 won, short sellers are estimated to have made a paper gain of about 20% based on the average short-sale price.
Stocks with short-selling ratios above 30%, including LG Display and Hanmi Semiconductor, are also believed to have generated double-digit paper gains, as their current share prices are well below the average short-sale prices. The recent market slump appears to have driven short selling in stocks that had posted strong gains earlier, especially in semiconductors and defense.
Among all stocks in the market, Doosan Fuel Cell showed the highest paper return. Its short-selling trading ratio stood at 11.46%, while the average short-sale price was 33,559 won. Considering that its current share price is around 18,000 won, short sellers are estimated to have recorded a paper gain of about 45% based on the average short-sale price.
By contrast, among the top 10 stocks by short-selling ratio, Cheil Worldwide and Yuhan Corporation are currently trading above their average short-sale prices. Based on those average prices, they are considered to be in paper loss territory. However, the average short-sale price refers to the average entry price across all short-selling transactions. Actual returns for investors may vary depending on the timing of the short sale, whether the position was covered, and transaction costs.
[email protected] Kim Hyun-jung Reporter