KOSPI breaks through 7,000 points, with cautious funds and increased short-selling alertness heating up

As the Korea Composite Stock Price Index breaks through the 7,000-point mark, the amount of “waiting funds” flowing into the stock market has hit an all-time high. At the same time, the securities lending and borrowing transaction balance—also seen as a leading indicator for short selling—has, for the first time, surpassed 180 trillion won, and expectations and warning sentiments inside and outside the market are rising in tandem.

According to data from the Korea Financial Investment Association and the Korea Exchange, as of the 9th, as of the 7th of this month, investors’ pre-deposits totaled 136.989 trillion won. “Investors’ pre-deposits” refers to funds deposited into securities accounts for the purpose of buying stocks, or funds that have not yet been withdrawn after selling stocks. Usually, when the stock market strengthens, this figure increases accordingly, which is interpreted as meaning there is more money available for additional buying. This figure has already surpassed the previous record of 132.0682 trillion won set on March 4 of this year.

The flow of waiting funds has fluctuated sharply over the past few months. Due to lingering effects of the U.S.-Iran war that dampened investor sentiment, pre-deposits were reduced to 107.4674 trillion won on the 6th of last month. However, since then, as the stock market has regained upward momentum, the figure has quickly rebounded. After breaking above 130 trillion won again on the 6th of this month, within just one day it had moved to nearly 137 trillion won. This is interpreted as market expectations that the Korea Composite Stock Price Index will continue to rise pouring in strongly in the short term. However, as funds chasing the uptrend increase rapidly, the likelihood of a heavier price burden and expanding volatility also rises—this is what keeps the market on alert.

In fact, it is not only optimism that is growing. The stock lending and borrowing transaction balance reached 180.6284 trillion won on the 6th of this month, the first time in history it has exceeded 180 trillion won. It also remained at a high level of 179.6659 trillion won on the 7th. Stock lending and borrowing refers to transactions in which institutions that hold stocks for the long term—such as pension funds or asset management companies—lend the shares to other investors and charge a fee. Because these shares are often used for short selling, the stock lending and borrowing transaction balance is usually viewed as a forward-looking indicator of short-selling demand. In other words, while the market expects further gains on one hand, it also expects that after a surge higher, a correction will follow—and that expectation is expanding at the same time.

The so-called “borrow-money-to-trade-stocks” indicator—credit trading financing balance—remains high as well. It rose to 36.683 trillion won on the 29th of last month, setting a historical high record, and then slightly declined to 35.5072 trillion won on the 7th of this month. Credit trading financing refers to the amount investors borrow from securities firms to buy stocks that they have not yet repaid. This high figure implies strong upside expectations. Conversely, if stock prices become volatile, it could also lead to an increase in forced liquidations (transactions carried out compulsorily due to insufficient collateral), which can become a destabilizing factor for the market.

The concentration of funds is also evident in the exchange-traded fund (ETF) market. As of the 7th, the total net asset value of ETFs listed on exchanges was 456.2392 trillion won, and the total market value was 458.2751 trillion won; the total net asset value increased by 6.2% compared with one week earlier. The product that attracted the most funds over the past week was “KODEX AI Power Core Equipment,” with inflows of 4438 billion won. Next were “TIGER Semiconductor TOP10,” “TIGER U.S. S&P500,” “SOL AI Semiconductor TOP2 Plus,” and “KODEX Semiconductor.” The top performers by return are also concentrated in information technology, semiconductors, and leveraged products, while inverse products recorded substantial losses. This suggests that the recent uptrend is being driven primarily by industries related to semiconductors and artificial intelligence. While this trend can support bullish expectations in the short term, if funds become overly concentrated in specific industries and leveraged products, even minor shocks may amplify volatility—something expected to become a challenge for the market going forward.