Index trend during the total ban on short selling. /Graphics=Reporter Lee Ji-hye.
It was found that the KOSPI 200 and KOSDAQ 150 indices recorded double-digit growth rates during the period when short selling was completely banned in the domestic stock market for nearly six months. However, rather than a ban on short selling, it is interpreted as a result of the low PBR (price-to-book ratio) market and the upward trend in major countries’ stock markets. The stock price trends of stocks with a high proportion of short selling balance were different. Financial authorities have come up with a plan to block illegal short selling in real time, but the timing of resumption of short selling has not been determined.
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After the ban on short selling, KOSPI 200 rose 14% and KOSDAQ 150 rose 18%.
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According to the Korea Exchange on the 25th, from November 6 last year, when the authorities completely banned short selling, to the previous day, KOSPI 200 and KOSDAQ 150 rose 14% and 18%, respectively.
This performance exceeds the KOSPI and KOSDAQ growth rates of 13% and 10% during the same period. The authorities had only allowed limited short selling of stocks belonging to the KOSPI 200 and KOSDAQ 150 until a complete ban.
Comparing the KOSPI 200 growth rate with major indices in the United States and Japan, it is not a remarkable performance. During the same period, S&P 500 and Nikkei 225 rose 16% and 20%, respectively.
It is analyzed that foreigners’ strong buying of low PBR stocks, rather than the ban on short selling, is the driving force behind the stock market rise. Concerns that foreigners would leave the domestic stock market due to the ban on short selling were also misplaced. Foreigners recorded a net purchase of 26.0961 trillion won during the short selling ban period. On the other hand, individuals and institutions net sold 17.8221 trillion won and 5.7064 trillion won, respectively.
Stock price trend of stocks with top short selling balance. /Graphics=Reporter Lee Ji-hye.
The securities industry believes that foreigners have responded to the government’s stock market stimulus measures, such as easing transfer tax regulations for major shareholders, abolishing financial investment income tax, and measures to support corporate value increases. However, the ruling party’s crushing defeat in the April 10 general election has raised doubts about the driving force behind capital market policies. It is difficult to expect any more positive effects from the stock market stimulus package.
There was no significant commonality found in the stock price trends of the top 10 stocks with short selling balances just before the ban on short selling. There was a significant difference in fluctuations between stocks, so stock prices moved depending on the industry or company issues. It was noticeable that EcoPro BM, which some individual investor groups claimed was the main target of short-selling forces, rose 7%, while EcoPro fell 19%.
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A real-time monitoring system was proposed, but… Timing of resumption not yet determined
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Lee Bok-hyeon, head of the Financial Supervisory Service, is looking at presentation materials during an open discussion with individual investors held at the Korea Exchange in Yeouido, Seoul on the morning of the 25th. /Photo = Newsis.
On this day, the Financial Supervisory Service announced a plan to build a real-time short selling system that focuses on the institution’s own balance management system and the exchange’s central blocking system for illegal short selling. The timing of resumption of short selling, which the authorities banned until the end of June this year, has not been determined. Lee Bok-hyeon, head of the Financial Supervisory Service, said, “We are reviewing (the timing of resumption) internally, centered around the Financial Services Commission,” and added, “To what extent the background, causes, and various justifications for short selling have been resolved, and how quickly computerization measures can be prepared, etc. “It needs to be considered comprehensively,” he said.
Realistically, it is impossible to establish a real-time short selling system by the end of June. This is because the Capital Markets Act needs to be revised in order to establish an institution’s balance management system, and it is estimated that it will take about a year to build the entire system. Even if the National Assembly immediately begins discussions on revising the Capital Markets Act, it is impossible to process the amendment without the consent of the Democratic Party of Korea, the largest party.
Previously, President Yoon Seok-yeol announced that he would not lift the ban on short selling until an improvement system for short selling was established. At the People’s Livelihood Debate on January 4th of this year, President Yoon said, “There are some who say that short selling will be banned only temporarily until June and that it will be lifted after the election, but that is absolutely not the case.” He added, “There is an electronic system that can completely eliminate side effects. “We will release this when it is established, but if not, we will continue to ban it,” he said.
[저작권자 @머니투데이, 무단전재 및 재배포 금지]
