Partial Lifting Is in Fact Overall Lifting
The South Korean government decided to lift its short selling ban on KOSPI 200 and KOSDAQ 150 stocks on May 3. It is pointed out that the partial lifting of the ban is in fact an overall lifting given that the stocks with larger market caps and trading volumes constitute almost 100 percent of short selling in the South Korean stock market.
When it comes to KOSPI, a total of 917 stocks are currently listed with the 200 stocks accounting for no less than 88 percent of its aggregate value, 2,060 trillion won. In KOSDAQ, where 1,470 stocks are traded, the 150 stocks represent half of its aggregate value, 392 trillion won. As for outstanding short selling positions, the 200 and 150 stocks constituted 94.4 percent and 74.5 percent as of Jan. 27, respectively.
The problem is that the short selling has been led by foreign investors and individual investors are urging the government to address the uneven playing field. Although short selling by individual investors was not prohibited before the implementation of the ban in March last year, it was almost impossible because foreign and institutional investors are overwhelming in terms of the scale of investment. In the 10 trading sessions immediately preceding the implementation, foreign, institutional and individual investors accounted for 50.21 percent, 49.13 percent and 0.66 percent of the total short selling value, respectively.