Stock short selling reaches $4.38 billion in 1st week of resumption in S. Korea

IANS April 6, 2025 273 views

South Korea has lifted its short selling ban, allowing trading for all listed firms after a yearlong suspension. Foreign investors quickly jumped back into the market, accounting for 90% of short selling activity and triggering a significant market selloff. The Korea Exchange reported a total of 6.4 trillion won in short selling during the first week, marking a substantial increase from previous periods. Financial regulators have implemented new monitoring systems to prevent potential illegal trading practices.

"Short selling on the main KOSPI and secondary KOSDAQ markets averaged 1.28 trillion won per day" - Korea Exchange
Seoul, April 6: 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.

Key Points

1

Foreign investors dominated 90% of short selling activity

2

KOSPI fell 3.62% during first week of resumption

3

Largest weekly net selloff since August 2021

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.

Reader Comments

J
James K.
Wow, $4.38 billion in just one week? That's insane! No wonder the markets took a hit. Foreign investors really dominating the short selling game here. 😮
S
Sarah L.
I understand short selling is part of market mechanics, but 90% foreign participation feels concerning. Hope the new monitoring systems actually work this time.
M
Mike T.
The KOSPI drop makes sense now. Short sellers came back with a vengeance! Interesting to see if this volatility continues or stabilizes in coming weeks.
A
Anna P.
While I support free markets, I think the article could have explained more about how these new regulations differ from before. What exactly changed in the monitoring systems?
D
David R.
That's a 62% increase from pre-ban levels! Markets clearly missed this trading strategy. Hope retail investors don't get caught in the crossfire though.
E
Elena S.
The timing is interesting with the pandemic ban history. Makes you wonder if we'll see another ban if volatility gets too extreme. Markets are so unpredictable these days!

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

Tags:
South Korea Stock Market Short Selling Korea Exchange Financial Regulation Stock Market Volatility
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