[2021 증시 진단] “Short-term adjustment is inevitable when short selling is resumed… Biotech hits”

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The heads of research centers at major domestic securities firms predicted that short-term adjustments in the stock market will be inevitable if short-selling transactions resume on March 16th. After the collapse of Corona 19, the domestic stock market rebounded in a V-shaped shape and continued its record high, and short selling transactions, which were banned for the past year, may flock together to unfold a bearish market. In particular, it is expected that bio stocks will have a big hit. However, opinions have also been raised that the adjustment range following the resumption of short selling will not be so large due to the active participation of individual investors in stock investment.

The center heads also decided that short selling needed to be resumed. Some voices said that the resumption point should have been earlier. The KOSPI index reached the 2900 line by breaking through the ceiling one after another, but the heads of the center think that the net function of short selling is necessary, such as preventing bubbles by preventing excessive stock prices. At the same time, it was pointed out that the short selling system, which is disadvantageous to individual investors, needs to be fair.

1 day <뉴스1>As a result of a survey on the prospects of the New Year’s stock market, Shinyoung Securities Kim Hak-gyun, Kyobo Securities Kim Hyung-ryul, Hyundai Motor Securities No Geun-Chang, Mirae Asset Daewoo Seo Chul-soo, KB Securities Shin Dong-jun, Hana Financial Investment, Cho Yong-jun, SK Securities Seven center heads, including Choi Seok-won, answered questions related to short selling.

Short selling is an investment method that borrows and sells stocks that are expected to drop in stock prices and then buys them back at a cheaper price when the stock price actually falls. Falling stock prices are a profit for short-selling investors.

Last year, when the global stock market, including Korea, plunged due to the corona 19 pandemic (a global pandemic), the Financial Services Commission banned short selling to prevent panic in the financial market. Short selling transactions for all listed stocks in the securities, KOSDAQ, and KONEX markets for six months from March 16th, and this measure was extended for six months to be maintained until March 15th this year.

Securities Street in Yeouido, Yeongdeungpo-gu, Seoul. 2017.12.29/News1 © News1 Lim Se-young Reporter

◇ Center heads “In case of reopening short sale, adjustment is inevitable” “Influence is minimal” opinion

Center heads generally predicted that the stock market would be adjusted once the short selling transaction resumed.

According to Daishin Securities, the KOSPI index has undergone a short-term correction since it resumed short selling transactions in the past. After the resumption of short selling on May 29, 2009, KOSPI has undergone a period adjustment at the level of -3% from its peak in June. In addition, after the resumption of short selling on November 9, 2011, the KOSPI fluctuated from 1770 to 1920p (7.8% price adjustment from the peak). However, after each adjustment, the uptrend resumed.

Shin Dong-joon, head of the KB Securities Center, said, “Referring to the past case where the stock market was adjusted after the resumption of short selling, there may be an adjustment in the stock market around March,” citing the resumption of short selling as one of the negative factors in the environment surrounding the stock market this year.

Kim Hak-gyun, director of Shinyoung Securities’ center, explained that “the resumption of short selling is (affect) neutral in the market as a whole,” but “is bad for some sectors that have a large valuation burden, such as bio.”

In the KOSDAQ market just before the ban on short selling, pharmaceutical and bio stocks such as Shillagen, Kookil Paper, CMG Pharmaceuticals, HLB, and Celltrion Healthcare were mostly stocks that had a lot of short selling balances. Accordingly, when short-selling transactions resume, the share price of these pharmaceutical and bio stocks could be particularly severe.

On the other hand, there is also a prospect that the impact of the resumption of short selling transactions will not be greater than expected.

“The effect of short selling on the stock market is minimal compared to the past. (Even if short selling trading resumes), it is highly likely that individuals will emerge as a key force in the stock market, leading the index to rise. ” According to this, as the widespread currency (the amount of currency in the market) is increasing, the stock market is flowing in money.”

Kyobo Securities’ center director Kim Hyung-ryul also drew a line saying, “The (short selling) system has no effect on corporate value.” The impact on the stock price is not the short selling system, but ultimately the fundamentals of the company (basic conditions).

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◇”To be the fastest balancer in the stock market”… System improvement opinions also come out

There are voices among individual investors that the ban on short selling should be extended. When the stock price rises, the subject of short selling has no choice but to sell short to avoid losses, but when the ban is lifted, short selling occurs at once, causing a crash, which in turn leads to personal damage.

However, the center heads saw that short selling should be resumed as scheduled in view of the net function of short selling.

Shin Dong-joon, head of KB Securities’ center, said, “As the stock market has reached an all-time high, it is necessary to resume short selling.” Based on the closing price, the KOSPI index fell to 1457.64 points (p) on March 19, last year when the Corona 19 crash occurred, and then rebounded in a V shape, closing at 2873.47p on December 30, recording an all-time high. Rose 1415.83p.

Likewise, Seok-won Choi, head of the SK Securities Center, who saw the need to resume short-selling transactions, said, “Short selling will act as a balancer in that credit loans can lead to more than just assets.” “Increase in both buying and selling (through short selling) It improves the price discovery function.”

Short selling has a net function that increases liquidity in the stock market and helps to form an appropriate price for individual stocks. If this is banned, there is a possibility of a shock from the collapse of the bubble as the stock value cannot be adjusted for being overvalued. Some argue that if the ban on short selling continues, there is a risk of the foreigner’s capital escape.

“Short selling will be able to play a role as a check against a situation where the risk of bubble generation increases as short selling is biased in one direction,” said Mirae Asset Daewoo’s center manager Seo Chul-soo. “The resumption of short selling should have been made earlier.”

However, “the short selling system needs to be improved at a fair level” (No Geun-chang, head of Hyundai Motor Securities Center).

“We need to thoroughly monitor and limit illegal transactions of market makers and expand opportunities for short selling by individual investors,” said Seok-won Choi, head of SK Securities’ center. “To prevent non-borrowing short selling, we have an infrastructure such as a computer system to prevent illegal transactions. “It is important to restore market confidence.”

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