Earlier this month, it was reported by the Financial Services Commission on Sunday, November 5, that South Korea will issue a stop to stock short-selling starting from Monday, November 6, until June 2024 to allow regulators to “actively” enhance the rules and systems.
The commission stated that trading with borrowed shares will be prohibited for equities on the Kospi 200 Index and Kosdaq 150 Index until June 20.
Short-selling of stocks was allowed in South Korea in May 2021, while a pandemic-era ban was in place for more than 2,000 equities. However, according to Smartkarma Holdings analyst Brian Freitas, reimposing the complete ban on the widely used trading practice could hinder the nation’s efforts to seek an upgrade in a critical global index.
He said,
- The short-sell ban will further jeopardize Korea’s chances of moving from an emerging market to a developed market.
- Expect bubbles to form in market pockets favoured by retail investors as short selling no longer acts as a brake on absurd valuations.
The exchange data reports that in South Korea, short-selling accounts for a small portion of the country’s US$1.7 trillion stock market, about 0.6% of the Kospi market value and 1.6% of Kosdaq.
The announcement by the Financial Services Commission on Sunday, November 5, comes ahead of general legislative elections to select National Assembly members in April. Some ruling party lawmakers in the assembly instructed the governments to suspend stock short-selling to address the protest staged by retail investors over the practice.
Read more: https://www.investingport.com/short-selling-suspended-in-south-korea-till-june-2024/