South Korean Stocks surge after Market regulator bans Short selling in June 2024

Published : 10 November 2023

South Korean stock market gained after short-selling ban

The company manufactures quartz watches and is the sixth largest branded watch manufacturer globally. 

Top Gainers

The biggest gainers were  Posco Future M, up 28%,  and LG Energy Solution, up 20%. 

Retail investors supported the decision:

Retail investors worried about the consequences of short selling have supported the ban, but there are also worries about how it may affect foreign investors and South Korean stocks' chances of being upgraded to developed market status by MSCI Inc.

Reasons for the ban

Reason 1: The action was taken before South Korea's general elections for the National Assembly in April, when the public's opinion of short-selling is still overwhelmingly negative. A few MPs from the ruling party called on the government to temporarily ban short selling of stocks in response to calls from individual investors who have organized demonstrations against the practice. 

Reasons for the ban

Reason 2: Numerous short-selling offenses by international companies prompted the ban. Because of this, the regulator wants to level the playing field for regular investors by penalizing traders who break the rules more severely.

What is Naked short selling?

Naked shorting is the illegal practice of selling shares that have not been confirmed to exist. Normally, before selling a stock short, traders must borrow it or decide that it may be borrowed. So naked shorting refers to short pressure on a stock that is greater than the market's trade-able shares.