Stock lending on S. Korean markets hits record high

Securities lending on the South Korean stock market has reached a record high, data showed Tuesday, in a sign that investors are not expecting any significant gains soon in the local bourse.

The combined amount of borrowed stocks listed on the main KOSPI and the tech-laden KOSDAQ markets came to 50.15 trillion won ($45.5 billion) as of Jan. 31, according to the data compiled by the Korea Financial Investment Association.

Securities lending is a transaction in which an investor borrows a stock for a certain period of time for a fee, and a rise in stock lending usually leads to an increase in short sales, meaning that investors are skeptical of a rise in the local stock market.

The data showed that the amount of shares of the country's top market cap Samsung Electronics Co. borrowed by investors from others totaled 6.18 trillion won as of Friday, the largest among others, followed by top shipbuilder Hyundai Heavy Industries Co. with 1.19 trillion won, top steelmaker POSCO with 1.17 trillion won and chipmaking giant SK hynix Inc. with 1.1 trillion won.

In the secondary bourse, Daum Kakao Corp., an internet portal and mobile messenger giant, saw the highest volume of securities lending worth 908.5 billion won, trailed by Celltrion Inc., a bio-pharmaceutical company, with 684.8 billion won.

Market watchers say the surge in stock lending could put a burden on the local equity market once they start selling the stocks.

The main bourse has moved in a tight range for the past few years on tepid corporate earnings and economic slowdown.

The country's key stock index, the KOSPI, had remained in a tight range this year, swinging narrowly between 1,870 and 1,940 points. The index closed at 1,952.68 points Monday, down from this year's high of 1,964.13 points on Jan. 30.

In contrast, KOSDAQ enjoyed a rally led by institutions searching for higher returns from small- and mid-cap shares.

"The increased stock lending in both KOSPI and KOSDAQ markets is not a positive sign," said Kim Young-il, a researcher at Daishin Securities. "The hike in borrowed stocks on the KOSDAQ amid the upward trend hints that investors see the current stock market as overvalued." (Yonhap)