Korean markets surge on reinstatement of short-selling ban

South Korean stocks surged on Monday in response to a reinstated ban on short-selling from financial authorities.

Regulators in Seoul decided to re-impose a ban on the practice until the end of June next year.

Short-selling involved traders selling borrowed shares, intending to repurchase them at a lower price and thus profiting from the price difference.

The ban would include all stocks listed on the Kospi, Kosdaq, and Konex.

Similar restrictions were lifted in May 2021, primarily for trades involving the shares of large-cap companies, which are found mainly on the Kospi.

“We seek to fundamentally resolve the ‘tilted playing field’ between organisations and individuals,” said Financial Services Commission chairman Kim Joo-hyun in a press release.

The move came after a report released in mid-October showed that South Korea’s stock market regulator had identified the involvement of two Hong Kong-based investment banks in naked short-selling.

That behaviour, expected to result in significant fines, involves an investor shorting a stock without first obtaining borrowed shares.

By the end of trading in Seoul on Monday, the Kospi was up 5.66% at 2,502.37, while the Kosdaq added 7.34% to 839.45.

Reporting by Josh White for Sharecast.com.