Anchor: The nation’s top financial regulator implemented a ban on short selling until the end of next June effective Monday. The announcement led to bullish market activity, with trading temporarily halted at one point to ease the soaring KOSDAQ index.
Max Lee has more.

Report: Concerns over illegal short selling that undermines market stability prompted the Financial Services Commission on Sunday to announce a suspension of the practice effective Monday until the end of June 2024.

Short selling refers to a trading technique in which a trader borrows shares from a broker and immediately sells them with the expectation that the share price will fall shortly after, at which point the trader buys the shares back and returns them to the broker while pocketing the difference minus any loan interest.  

Financial regulators said “growing external uncertainties” due to a global slowdown and the armed conflict between Israel and Hamas are heightening volatility in the domestic stock market.

It added that under such conditions, concerns over the fair pricing of stocks in the local markets remain very high, with illegal short selling by foreigners and institutional investors continuing.

On of the first day of the ban, the stock markets soared, with the benchmark Korea Composite Stock Price Index (KOSPI) closing the day up 134-point-03 points, or five-point-66 percent, to close at two-thousand-502-point-37. 

The tech heavy KOSDAQ also jumped, climbing 57-point-40 points, or seven-point-34 percent, to close at 839-point-45, with a spike early in the day forcing sidecar curbs to be activated for the first time in three years and five months, briefly halting program trading.

Meanwhile, the discovery of large-scale illegal short selling by major global investment banks has strengthened public support for the ban among individual investors.

On Monday, the Financial Supervisory Service launched a special short-selling investigation team to thoroughly investigate the activity of around ten global investment banks, with plans to review effective measures to establish a real-time block system to prevent illegal naked short selling in advance, long a demand of retail investors.

Max Lee, KBS World Radio News.