Seoul shares plunge on 1st day of short-selling resumption

Electronic signboards at a Hana Bank dealing room in Seoul show the benchmark KOSPI fell 76.86 points to 2,481.12 points, while the Korean currency weakened by 6.4 won to close at 1,472.9 won per dollar, Monday. Yonhap

Korean stocks lost 3 percent, Monday, while the Korean currency weakened to its lowest level in about 16 years, closing at 1,472.9 won against the U.S. dollar.

The fall of the stocks and the Korean won's dipping were driven by short selling that was resumed after a ban of nearly 18 months along with concerns over upcoming reciprocal tariffs by the Donald Trump administration.

The benchmark KOSPI retreated 76.86 points, or 3 percent, to close at 2,481.12 points, extending its losing streak to a third session.

It kicked off at 2,513.44 points but fell to 2,491.95 points in less than 30 minutes, dipping below 2,500 during intraday trading for the first time since Feb. 10.

The downward momentum lasted throughout the remaining session.

The secondary bourse Kosdaq sank 20.91 points, or 3.01 percent, to finish at 672.85 points, as it also ended lower for the third consecutive session.

In particular, Monday’s closing price marked a yearly low for the junior bourse.

The Korean won closed at 1,472.9 won against the dollar on the daytime market. The local currency deprecated by 6.4 won to hit the lowest level since the global financial crisis in 2009.

The fall on the stock market was led by foreign investors, who net sold 1.57 trillion won ($1.06 billion) on the KOSPI — the largest amount since 1.71 trillion won on Jan. 27, 2022. Foreign investors were the main target when the short-selling ban was imposed in November 2023.

A risk-hedging strategy, short selling uses borrowed stocks and brings profit to investors from falling stock prices.

The selling spree heightened volatility on the market after it was dampened by major events that are likely to coincide this week — U.S. imposition of reciprocal tariffs on Wednesday and separate tariffs on cars on Thursday, as well as the Constitutional Court’s looming verdict on President Yoon Suk Yeol’s impeachment.

Among the most affected stocks were those in the secondary battery sector.

They were regarded as vulnerable toward short selling as their prices were overvalued despite sluggish profits due to the reversal of U.S. eco-friendly energy policies.

All listed on the KOSPI, LG Energy Solution shed 6.04 percent, while SK Innovation lost 7.11 percent and Samsung SDI retreated 5.47 percent.

The battery stocks on the Kosdaq suffered a fall as well, including EcoPro and EcoPro BM, which lost 12.59 percent and 7.05 percent, respectively.

Of the large caps, chipmakers were weak as Samsung Electronics lost 3.99 percent and its cross-town rival SK hynix retreated 4.32 percent.

The country’s No. 1 carmaker Hyundai Motor fell 3.8 percent, while food giant CJ CheilJedang lost 3.14 percent and leading pharmaceutical firm Celltrion slid 4.57 percent.

Asked how long short selling will continue to affect the market, Samsung Securities analyst Shin Seung-jin said, “Foreign investors will brace for risk-hedging selling against heightened external and internal risks this week.”

Han Ji-young, a Kiwoom Securities analyst, said that resuming short selling will attract more foreign investors in the medium to long term and that the trading practice can “boost overall liquidity in the market.”

In Korea, short selling is dominantly practiced by foreign investors due to their credibility and capability in funding, which retail investors here relatively lack.

The ban had been imposed in order to protect retail investors, who rely on higher stock prices to reap profit.

The ban, however, was regarded as a reason for drawing out overseas investments from Korea.