Stock short selling in Korea hits yearly high
Stock short selling in Korea surged to a yearly high on increased global financial uncertainties. Yonhap
Stock short selling in South Korea soared to a yearly high on increased global financial uncertainties, bourse data showed Friday, sparking controversy among individual investors over an "unfair game."
According to the data compiled by bourse operator Korea Exchange (KRX), the daily short selling volume averaged 1.09 trillion won (US$891.8 billion) as of Thursday's closing. The tally replaced the previous record of 1.08 trillion won in only four days.
The rapid growth in short selling is largely attributed to foreign investors, who traded as much as 753.1 billion won, up 78.6 percent from the previous session's close. On the same day, institutional investors' short selling dropped by 41.7 billion won to 323.7 billion won.
Stock short selling is a trading technique in which investors sell stocks they borrowed on the belief that share prices will fall in the near future. The more stock prices fall, the more profit they get.
Short selling soared Thursday as the benchmark Korea Composite Stock Price Index (KOSPI) tumbled 2.78 percent to close at 1,834.33, the lowest level since Aug. 24, 2015.
Short selling has been a source of complaint for individual investors with limited leverage, while being favored by offshore and institutional investors as a convenient investment tool.
Of the entire short selling volume of 103.5 trillion won in 2019, foreign investors took up about 62.8 percent, followed by institutions with 36.1 percent. Individuals accounted for only 1.1 percent.
South Korean financial authorities are mulling measures to temporarily further tighten rules on stock short selling in an attempt to stabilize the stock market amid uncertainties over the new coronavirus outbreak.
The move came just two days after the authorities temporarily eased requirements for the designation of certain shares subject to a possible ban on short selling.
On Thursday, the authorities banned short selling of stocks of 95 companies, including Samsung Electro-Mechanics and Kumho Tire Co., until March 26. (Yonhap)