Tightened Regulations Needed

Short-selling stocks of Celltrion were offered almost every day to March 14 from February 9 when the company moved to the KOSPI market.
Short-selling stocks of Celltrion were offered almost every day to March 14 from February 9 when the company moved to the KOSPI market.

 

Celltrion, which relocated to the KOSPI market from KOSDAQ market due to short selling, is still suffering from short selling at the KOSPI. More than 10,000 people have filed petitions on the website of Cheong Wa Dae (the presidential Office), asking the Presidential Office to look into the legality of the short selling.

According to the Korea Exchange on March 15, short-selling stocks were offered almost every day to March 14 from February 9 when Celltrion moved to the KOSPI market. During this period, the short selling volume reached 6,834,908 shares and the cumulative short selling amount reached 2.280 trillion won (US$2.05 billion). In particular, on March 8, one day before the company was transferred to the KOSPI 200 index, the total number of short-selling stocks reached a record high of 1,397,933 which translated into 485.08 billion won (US$436.5 million).

In the market, many experts continued to forecast that Celltrion will elude short selling groups if Celltrion moves to the KOSPI market with a relatively better supply-demand condition than KOSDAQ but minority shareholders’ prediction turned out to be completely false. An official from the financial investment industry said, "As Celltrion moved to the KOSPI market, short sale volume followed it," said an official in the financial investment industry. “In particular, short-term events, such as entering the KOSPI 200 index, gave rise to a sharp rise in short selling.

In the end, Celltrion shareholders petitioned Cheong Wa Dae to look into the legality of the short selling. At present, there are 14,539 people who signed up for the petition.

Short selling is a trading technique that borrows and sells stocks and makes profits by buying them again when their prices fall. Despite short selling’s positive roles such as stock price stability and liquidity supply, it is absolutely disadvantageous for individual investors like an 'slanted playing ground.' This fact is fueling demand for its abolishment day by day.

The Korea Exchange also tightened regulations on short selling announcements and is running a system to designate overheated short selling stocks to extirpate speculations via short selling. However, noises caused by short selling have not stopped. In recent years, the Korea Exchange strengthened criteria for the designation of overheated short selling stocks, and introduced short selling and stock lending and borrowing transaction information services based on big data.

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