Short Selling Surges 10x Resumption
- South Korea fully lifted its ban on stock short selling this week, for the first time in five years.
- The Financial Services Commission (FSC) decided on March 21 to reinstate stock short selling as previously planned from March 31. The decision was reached as financial authorities determined...
- On March 28, the first day of resumed short selling, 291.4 million shares were traded.
South Korea Resumes Short Selling Amid Market Concerns
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South Korea fully lifted its ban on stock short selling this week, for the first time in five years. Market watchers anticipate shipbuilders, steelmakers, and battery manufacturers will be primary targets of these trading practices.
The Financial Services Commission (FSC) decided on March 21 to reinstate stock short selling as previously planned from March 31. The decision was reached as financial authorities determined that concerns over factors undermining fair price formation in the market could be resolved.
Trading volume surged upon resumption. On March 28, the first day of resumed short selling, 291.4 million shares were traded. Repayments accounted for onyl 19.3 million shares,leaving nearly 300 million shares available for short selling.
Loan transactions, which involve borrowing and lending stocks for a fee, are considered a leading indicator of short selling activity. Investors borrow stocks with the expectation of repaying them at a lower price.
Data from the Korea Exchange Data Data System indicates the volume of shares signed on March 28 was 9.6 times the average daily volume of 30.17 million shares in the three months before the FSC’s ban on Nov.5, 2023. The number of shares signed surpassed 60 million for the first time since the short sale ban on Nov. 20, 2023, reaching 69.8 million shares per day by March 27.
The balance of loan transactions has also increased substantially. On March 28, the loan balance reached 2.4361 billion shares, valued at 66.64 trillion won. This marks the first time the number of shares has exceeded 2 billion as November 2023, with the amount reaching levels seen in December 2023. Before the short selling ban, on nov. 3, 2023, the loan balance was 2.26645 billion shares, valued at 82.7 trillion won.
Samsung Electronics leads the securities market with a loan balance of 6.81 trillion won (1.131 billion shares). Other companies with high loan balances include LG Energy solution (3.8969 billion won), SK Hynix (3.4059 billion won), KODEX 200 listed index funds (1.73 billion won), Hanwha Aerospace (1.585 trillion won), Yuhan Corporation (1.761 billion won), Hyundai Motor (1.359 billion won), and Kia (98.5 billion won). The top 10 stocks account for 43.2% of the total balance.
In the KOSDAQ market, EcoPro BM has the highest loan balance at 1.53 trillion won, followed by EcoPro at 95.47 billion won.
HD Hyundai Heavy Industries saw the largest increase in loan balance on March 28, at 68.9 billion won. Other companies with significant increases include Hanwha Ocean (67.7 billion won), Samsung heavy Industries (57.8 billion won), Kakao (46.1 billion won), Doosan Energy village (46.1 billion won), Samsung SDI (38.8 billion won), and Naver (36 billion won).
The Korea Exchange has implemented a short selling central inspection system (NSDS) to monitor short selling activity and prevent illegal practices. as of March 31, 107 corporations meet the criteria for short selling investment under the revised Capital markets Act.
South Korea Resumes Short Selling Amid Market concerns
Published:
Understanding Short Selling
What is Short Selling?
Short selling is an investment strategy where traders sell borrowed stocks, aiming to buy them back at a lower price to profit from a decline.
Why Was Short Selling Banned in South Korea?
south Korea fully lifted its ban on stock short selling this week, for the first time in five years. The ban was initially introduced due to a global financial market rout triggered by the COVID-19 pandemic.
How Does Short Selling Work?
Investors borrow stocks with the expectation of repaying them at a lower price.
South Korea’s Latest Actions
When Did South Korea Lift the Short Selling Ban?
The financial Services Commission (FSC) decided on March 21 to reinstate stock short selling as previously planned from March 31.
Why Was the Ban Lifted?
Financial authorities determined concerns over factors undermining fair price formation in the market could be resolved.
What Happened After the Ban Was Lifted?
- Trading volume surged upon resumption.
- Data from the Korea Exchange Data Data System indicates the volume of shares signed on March 28 was 9.6 times the average daily volume of 30.17 million shares in the three months before the FSC’s ban on Nov.5, 2023.
- The number of shares signed surpassed 60 million for the first time since the short sale ban on Nov. 20, 2023, reaching 69.8 million shares per day by March 27.
What are Loan transactions?
Loan transactions, wich involve borrowing and lending stocks for a fee, are considered a leading indicator of short selling activity.
Market Impact and Key Players
What is The Current Loan Balance?
On March 28, the loan balance reached 2.4361 billion shares,valued at 66.64 trillion won. This marks the first time the number of shares has exceeded 2 billion since November 2023,with the amount reaching levels seen in December 2023.
Which Companies are Heavily Involved?
Samsung Electronics leads the securities market with a loan balance of 6.81 trillion won (1.131 billion shares).Other companies with high loan balances include LG Energy solution, SK Hynix, KODEX 200 listed index funds, Hanwha Aerospace, Yuhan Corporation, Hyundai Motor, and Kia. The top 10 stocks account for 43.2% of the total balance.
Which industries are Targeted?
Market watchers anticipate shipbuilders, steelmakers, and battery manufacturers will be primary targets of these trading practices.
What About the KOSDAQ market?
In the KOSDAQ market, EcoPro BM has the highest loan balance at 1.53 trillion won, followed by EcoPro at 95.47 billion won.
Which Companies Saw Increased Activity?
HD Hyundai Heavy Industries saw the largest increase in loan balance on March 28, at 68.9 billion won. Other companies with meaningful increases include hanwha Ocean, Samsung heavy Industries, Kakao, Doosan Energy village, Samsung SDI, and Naver.
Monitoring and Regulation
Are There Any Safeguards in Place?
The Korea Exchange has implemented a short selling central inspection system (NSDS) to monitor short selling activity and prevent illegal practices. As of March 31, 107 corporations meet the criteria for short selling investment under the revised Capital markets Act.
Key Data Points
Here’s a summary of essential figures related to the short selling resumption:
| Metric | Value |
|---|---|
| Date of Short Selling Resumption | March 31, 2025 |
| Total Shares Traded on First Day (March 28) | 291.4 million |
| Shares Repaid on First Day (March 28) | 19.3 million |
| Loan Balance Value (March 28) | 66.64 trillion won |
| Number of Shares Signed Per Day (March 27) | 69.8 million |