Stock Short Selling Reaches $4.38 Billion In 1st Week Of Resumption In South Korea

Seoul: Short selling activity in South Korean amounted to 6.4 trillion won ($4.38 billion) in the first week after a more than a yearlong ban was lifted, the bourse operator said on Sunday. Last Monday, short selling was allowed for all listed firms following a suspension imposed in November 2023 after a series of naked short selling violations involving several global investment banks was discovered, reports Yonhap news agency.

According to the Korea Exchange, short selling on the main KOSPI and secondary KOSDAQ markets averaged 1.28 trillion won per day, totalling 6.4 trillion won for the week.The weekly figure marked a sharp rise from the daily average of 788.4 billion won tallied during a month just before the country banned the trading practice.

Foreign investors accounted for 90 percent of the short selling activity on the main KOSPI, while institutional investors took up 9 percent. Last week, the KOSPI fell 3.62 percent to close at 2,465.42 points on Friday, and the tech-laden KOSDAQ also suffered a 0.92 percent drop to finish at 687.39.

Foreigners sold a net 5.86 trillion won over the one-week period, marking the largest weekly net selloff since August 2021. Starting Monday, short selling was allowed for all listed firms for the first time since March 2020, when the authorities banned short selling for listed firms amid a market rout caused by the COVID-19 pandemic.

The ban was partially lifted in May 2021 before it was reimposed in 2023. The bourse operator had developed a new system to detect any illegal practices. The Financial Supervisory Commission, the country’s financial regulator, also drew up new regulatory changes.

The Financial Supervisory Service, the financial watchdog, said earlier it will enhance market monitoring and implement measures to prevent excessive volatility of certain stocks for up to two months after the short selling ban is lifted.