All listed stocks in S. Korea available for short selling, bringing short-term volatility

Amid unstable global stock markets as well as the resumption of short-selling at home, local stocks were sharply down today.

Park Jun-han has the details.

Starting Monday, South Korea resumed short selling on its stock market after a 17-month suspension.

And for the first time in five years, the country is allowing short selling for all listed stocks.

With investors now able to borrow and sell stocks before buying them back later, the market is seeing increased volatility, which has intensified amid falling global stock prices.

The benchmark KOSPI, at around 1:30 PM, briefly dropped below 2,480 points.

At the market's close on Monday, 3:30 PM local time, the KOSPI closed at around 2,481, down 3 percent from last Friday's market close.

On the same day, the value of the U.S. dollar against the Korean won climbed to 1,472.9 won per dollar, up 6.4 won from last Friday's close.

This is the highest since March 2009.

Short selling involves investors borrowing stocks, selling them at the market price, and later repurchasing them, ideally at a lower price, to return to the lender.

"That's what you have in a normal market, in any international market. If it goes too high, you have short sellers to stop it from going too high."

To create a safer and fairer stock trading environment and to facilitate the return of short selling, the Korea Exchange is implementing measures such as strengthened penalties for illegal short selling and increased monitoring of transaction activities.

Additionally, those who borrow stocks must repay them within 90 days, with an extension of up to a year.

"Well, the large complaint that the individual investors had was that larger companies were engaged in naked short selling. That means short selling without borrowed stocks on hand.

And then I believe they have now databases for short-selling transactions so that anybody can see that the transactions are done fairly rather than below the table sometimes."

Amid short-term market volatility, industry experts emphasize the long-term necessity of short selling in Korea, as it is expected to attract more foreign capital inflow, enhance liquidity, and help investors manage risks.

Park Jun-han, Arirang News.