Geopolitical risks usually take a backseat to fundamental stock valuations as well as volatility, momentum and quantitative analysis but has roared into the forefront of any South Korean investment discussions recently. The possibility of a non-diplomatic based event, outright war or ICBM launches, resulting from North Korean tensions is finally being reflected in the South Korean market. The KOSPI index was up 20.98% as it hit its year-to-date high on July 24th, and has dropped 3.39% since then. The Korean Won had strengthened by 7.27% by July 24th and has weakened by 0.97% since then.
Although most South Korean equity short exposure is derived from trading swap contracts there is still enough active outright short selling to gain insight into which Korean stocks are the most popular short positions. We track $10.2 billion of outright and swap based Korean short positions and here are the most shorted Korean stocks and sectors.
As expected, the Korean sectors with the largest short interest are in pharma, capital goods, autos and technology.
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Managing Director Predictive Analytics, S3 Partners
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