After the ban on short selling, the KOSPI 83 and the KOSDAQ 94 jumped.

[편집자주] Anxiety among individual investors, so-called Donghak ants, is growing ahead of the resumption of empty selling. Although the KOSPI 3000 era, which was considered unanswered, was opened, the resumption of short selling could add cold water to the rally. Is short selling really the main culprit that disturbs the stock market, or is it a reinforcement group that prevents the stock price bubble and maintains a fair price? Is it really a’tilted playground’ that is unfavorable to ants, Hankyung.com looked into the controversial’short selling’ through three series. .

The KOSPI index broke through the 3200 line by continuing the new record march every day. Despite the spread of the new coronavirus infection (Corona 19), the ban on short selling played a part in the background that the stock market could rise sharply without major obstacles. After the ban on short selling, the KOSPI index surged 83% and the KOSDAQ index, which was targeted for short selling, surged 94%.

Short selling is an investment technique in which stocks that are expected to decline in stock prices are borrowed and sold first, and when the stock price falls, the stock is bought again and paid off, and then a profit is made. If you borrow the item A, sell it for 10,000 won, buy it for 9000 won, and repay it, you will earn 1,000 won excluding fees.

Market surged after ban on short selling

According to the Korea Exchange on the 14th, the KOSPI surged 1433.43 points from 1714.86 to 3148.29 for about 10 months until the day before after the financial authorities banned short selling on March 16 last year. In terms of the index increase rate, it soared a whopping 83.58%. The rise of the KOSDAQ index was wider. The KOSDAQ jumped 474.62 points from 504.51 to 979.13, with an increase rate of 94.07%.

The pharmaceutical and bio industries, which were the main targets for short selling, benefited. The pharmaceutical industry in the securities market and the pharmaceutical industry in the KOSDAQ market showed remarkable rise. The pharmaceutical industry rose a whopping 1396.95 points (114.67%) from 9938.91 to 21335.86, and the pharmaceutical industry also surged 7312.23 points (119.72%) from 6107.46 to 13,419.69.

The Yeouido Securities Street predicted that if the ban on short selling was implemented at the time, investor sentiment would stabilize and the index would rise due to the positive effect of supply and demand inflow. When the ban on short selling was implemented, the market moved in the direction predicted by experts.

As short selling, which was the exclusive property of foreigners and institutions, was banned,’ant (individual investors)’ participation in the stock market increased. Last year, individuals swept a total of 63,924.0 billion won in domestic stock markets (KOSPI, KOSDAQ, KONEX).

In January (6,272.5 billion won) and February (6,387 trillion won) when concerns about Corona 19 began to rise, as well as March, when the ban on short selling was enforced, individuals bought 11,49 trillion won from the stock market. This is the highest level among monthly net purchases last year. Since then △ April 5,531.2 billion △ May 5,606 trillion △ June 5,2952 billion △ July 3,874 trillion △ August 7,689.8 billion △ September 7,6287 billion △ October 3,215.9 billion △November 6,272.5 billion △December 3,965.7 billion, etc.

Lee Jae-seon, a researcher at Hana Financial Investment, said, “After the ban on short selling, the market has been positively affected in terms of supply and demand.” .

Politicians say “ban” ahead of resuming short selling

The ban on short selling is until March 15th. As the time of resumption approaches, there is a growing voice in politics that the ban should be extended, centered on the ruling party.

“Donghak ants are not simply making money, but are investing in Korea,” said Yang Hyang-ja, the top member of the Democratic Party’s recent radio program. “The short sale also insisted that measures should be extended.

“In a situation where individuals’ distrust of short selling is severe, resuming it without resolving it can have a negative impact on the market.” “It is necessary to resume short selling after a plan is in place to maximize the net function of short selling and resolve the dysfunction. “Do” he emphasized.

Democratic Party lawmaker Park Yong-jin also said, “We demand that we reopen short selling with institutional holes and be cautious again,” and pointed out that the current short selling system is a’tilted playground’ with many holes in illegal activities.

“The Financial Services Commission says that the institutional supplementation is sufficient, but there are many reasons for the prohibition of short selling that were omitted in the past bill review process, and tens of thousands of suspected cases of illegal short selling by foreign investors were confirmed even during the period of the ban on short selling. It has strengthened, but has not been able to provide an answer to the blocking,” he criticized.

However, some point out that the politician’s claim to extend the ban on short selling is due to populism (populism) conscious of the re-election in April.

According to the minutes of the Political Affairs Committee released by the National Assembly, it was reported that last month, members of the ruling and opposition Political Affairs Committee agreed to resume short selling without disagreement. At two meetings held in November and December of last year, Democrats mentioned that “the system should be short-selling,” etc., and members of the People’s Powers also said, “We can raise (amendment to the short-selling bill) a little more than other bills.” did.

Even though they agreed to resume short selling and discussed system improvement, the recent KOSPI index surpassed 3000, so they quietly reversed their position.

An official in the financial investment industry who requested anonymity said, “There are positive parts of the ban on short selling, but there are certain parts that are clearly adversely affecting the market,” he said. “As a representative example, a surge in stock price (valuation) compared to earnings can be cited.” .

He pointed out that “the capital market should move according to the market logic, but the situation in which the politics’ breath is working is a problem,” he pointed out, “It is difficult to express opinions on whether to resume short selling.”

Currently, the financial authorities are nailed to finish improving the system with the aim of resuming short selling in March.

In a recent announcement, the Financial Services Commission said that the temporary ban on short selling due to Corona 19 will end on March 15. With the aim of resuming short selling in March, the plan is to improve the system by strengthening the punishment for illegal short selling, improving the market maker system, and improving individual accessibility for short selling.

Lee Song-ryul, reporter of Hankyung.com [email protected]