Foreign Brokerages Call for Easing Ban on Short Selling
By Yoon Ja-young
Staff Reporter
Foreign securities companies called for the government to ease a ban on short selling. They also stressed that the government needs to take preemptive and decisive measures to renew trust from foreign investors.
According to the Korea Securities Dealers Association, CEOs of foreign securities companies in Seoul advised the government to make efforts in globally promoting the local market. The association invited CEOs of five foreign securities companies and executives in charge of international affairs at four local securities companies to the meeting to gather tips on the stock market. The Seoul bourse has made deep plunges, and the massive sell off of stocks by foreign investors has been cited as the primary reason.
While the association cited global preference for safety assets, liquidation of hedge funds, and negative reports by some foreign media as downward factors on the stock market, CEOs of foreign securities companies called for easing restriction on short selling. Short selling, or selling stocks one does not own by borrowing them, has been blamed for accelerating the stock market plunge. Thus, countries strengthened bans on short selling following the recent global stock market turmoil. The CEOs, however, said foreign investors' overall trading, both selling and buying of stocks, are losing steam due to the ban on short selling.
Regarding the foreign exchange market, the CEOs advised that the government should convince investors that there is no problem in the foreign exchange market by providing them accurate information.
It should refrain from excessive market intervention, they pointed out.
The heads of foreign brokerage houses expected dumping of Seoul stocks by foreigners to ease by next month.
They also advised that there should be more efforts to help the country's stock market upgrade to the ``developed market'' category by the Morgan Stanley Capital International global index. The inclusion could help pull up the index as global funds buying stocks according to the index would increase the portion of Korean stocks in their portfolio.