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As retail investors sharply expanded margin financing in Samsung Electronics and SK hynix, securities lending balances that could underpin short selling also surged at both chipmakers.

Foreign investors in particular showed a net borrowing trend in the lending market, with the volume of shares they borrowed exceeding the volume they lent by more than 300 million shares, and their actual short selling transactions were overwhelmingly dominant.

According to the Korea Financial Investment Association and Koscom Check, securities lending balances for Samsung Electronics and SK hynix — used as a leading indicator of short selling — climbed steeply over the past month from June 8 to Tuesday.

During that period, Samsung Electronics' lending balance rose by about 900 billion won ($596 million), while SK hynix's jumped by roughly 9 trillion won. The combined increase for the two stocks alone reached approximately 10 trillion won. As of Tuesday, Samsung Electronics' lending balance stood at around 25 trillion won and SK hynix's at about 30.5 trillion won, bringing the combined total to roughly 55.5 trillion won.

The surge in SK hynix's lending balance is considered exceptional. As recently as June 8, SK hynix's lending balance stood at about 21.5 trillion won, trailing Samsung Electronics' roughly 24.1 trillion won and ranking second. Within a month, however, it swelled by about 9 trillion won, overtaking Samsung Electronics to claim the top spot.

Securities lending serves a range of purposes beyond short selling, including arbitrage, hedging and settlement. However, because naked short selling is banned in South Korea, investors must first borrow shares before executing a short sale. For this reason, the market treats lending balances as one of the most widely used leading indicators of short selling demand.

Foreign investors are the most active participants in the short selling market. Over the same period, the volume of shares foreign investors borrowed reached about 930 million shares, exceeding the roughly 570 million shares they lent by more than 300 million — meaning they borrowed far more than they lent out.

Foreign investors also dominate actual short selling transactions. According to the Korea Exchange, as of Tuesday, foreigners' short selling transaction value stood at about 1.9 trillion won, far exceeding that of institutional investors at roughly 350 billion won and retail investors at about 12 billion won. Foreign investors' presence was pronounced in both the lending market and short selling activity.

Retail investors, meanwhile, continue to pile into leveraged bets on the two semiconductor giants. Over the same period, retail margin balances rose by about 1.1 trillion won in Samsung Electronics and about 1.4 trillion won in SK hynix — a combined increase of roughly 2.5 trillion won across the two stocks within a month.

As of Tuesday, margin balances stood at about 5.4 trillion won for Samsung Electronics and about 5.2 trillion won for SK hynix, bringing the combined total to roughly 10.6 trillion won. Retail investors' aggressive leveraged buying appears driven by expectations of an industry recovery and improved earnings outlook centered on AI semiconductors.

Market observers are taking note of the diverging leverage strategies playing out simultaneously: retail investors are expanding leveraged long positions through margin financing, while foreign investors are increasing net borrowing in the lending market. Some say the simultaneous rapid rise in retail margin balances and lending balances — a leading indicator of short selling — signals a sharp divergence in how market participants view the leading semiconductor stocks.

Retail investors are betting on gains, buoyed by expectations of an AI semiconductor industry recovery and stronger earnings, while foreign investors are expanding borrowing in the lending market to prepare for hedging, arbitrage and short selling. With opposing leveraged positions growing at the same time, any increase in share price volatility could widen the gap in investment outcomes considerably.

"The simultaneous rapid rise in margin balances and lending balances could be a signal that market participants are moving in opposite directions," an industry official said. "If share price volatility expands going forward, the range of profit and loss swings for leveraged investors could grow just as sharply."


th5@heraldcorp.com