Short Stock Selling
More than a half of short stock selling is traded by foreign financial firms in the South Korean stock market.
According to the data from National Assembly National Policy Committee member and the ruling Minju Party lawmaker Park Chan-dae submitted by the Financial Supervisory Service and the Korea Exchange on October 15, there was a total of 746,624 cases of short stock selling in the KOSPI market from June 30 last year to August 30 this year.
Out of these, 432,836 cases of short stock selling were traded by foreign investors, accounting for 58 percent of the total. The number of short stock selling cases in the KOSDAQ market over the same period reached 636,065 and 83.4 percent, or 530,521, of them were traded by foreigners.
All the top five short sellers were foreign institutions. In the KOSPI market, short selling was led by Morgan Stanley, Credit Suisse and Securities Europe Ltd. Morgan Stanley was also number one short seller in the KOSDAQ market. The amount of short selling owned by top 5 foreign short sellers in the KOSPI stood at 5.01 trillion won (US$4.45 billion) a day on average, which was 3.5 times higher than 1.43 trillion won (US$1.27 billion) of the daily average held by firms that came in sixth to tenth. In the KOSDAQ market, the amount of short selling owned by top 5 short sellers totaled 2.27 trillion won (US$2.02 billion), which was 4.9 times higher than that of companies that ranked sixth to tenth.
Park said that such a trend is shown as foreign companies are relatively free from the domestic public opinion which has a negative perception of short stock selling. He also said that the problem is that there is still a high number of short selling even though the government has implemented tougher rules on short-selling, including the automated disclosure system, from June in order to reduce the damage from short selling trades. Park added, “We need to consider ways to additionally ban short selling in the KOSDAQ market that can make share prices to crash amid growing market uncertainties caused by North Korea’s nuclear threat and the THAAD crisis.”