South Korea's reinstatement of short selling on March 31, 2025, marked a structural turning point in the country's equity market. Nearly 19 months later, short interest across the KOSPI has more than tripled as a percentage of float, reflecting a substantial rebuilding of short-side exposure. Notably, this expansion occurred alongside a powerful equity-market rally, with short positioning approaching its highest levels near the KOSPI's June 2026 peak.

Short Interest Sentiment

• Structural expansion in short positioning: KOSPI notional weighted short interest has increased from approximately 1.5% of float to 5.0% currently, an increase of roughly 3.3 times following the lifting of the ban. Positioning initially climbed toward 4.7% by October 2025 and re-accelerated to a peak of 5.6% in June 2026. The sustained increase reflects a rebuilding of short-selling activity, although the expansion should not be interpreted exclusively as directional bearish conviction.

• Elevated short exposure despite market correction: Short positioning approached its highest levels as the KOSPI reached its June 2026 high, as short exposure built up along with rising prices. Despite the market subsequently falling by 40%, short interest remains near 5.0% of float, only modestly below the recent peak.

Technical Analysis

• Trend deterioration following an extended advance: The index now trades 16% below its 50-day moving average (6,614) and 14% below its 200-day moving average (6,442), reflecting significant deterioration in intermediate- and longer-term price trends. The 50-day moving average remains above the 200-day moving average, but the narrowing spread indicates weakening underlying trend strength.

• Negative momentum reinforces technical weakness: The MACD remains below both its signal line and the zero line, consistent with persistent downside momentum. The RSI near 31 indicates weak relative strength and proximity to oversold conditions, although neither indicator currently confirms any sustainable reversal.

Takeaway

• The KOSPI's post-ban evolution highlights an important shift in South Korean equity positioning: short interest expanded during an extended market advance and remains elevated following a pronounced correction. While the initial increase partly reflects the normalization of short-selling activity, the persistence of short positioning combined with deteriorating price trends and negative momentum warrants attention.