[이코노믹리뷰=정다희 기자] As the financial authorities extended the ban on short selling once more, it was pointed out that the stock market’s upward trend was artificially continued. The Financial Services Commission decided to extend the ban on short selling on the 3rd until May 2nd.
According to Bloomberg News, experts said on the 5th (local time) that the decision is expected to have an adverse effect on the market. The Korean stock market surged from last year to early this year. In this situation, financial authorities are conscious of individual investors and extend the ban on short selling, which is used as a hedging tool for institutions, explaining that institutions are concerned about this.
Indonesia, which has maintained the ban on short selling until the last time along with Korea, is also known to be lifting the ban this month.
Nader Naim, head of AMP Capital Investment’s Dynamic Market, said, “It is surprising that Korea has extended the ban on short selling even though Korea is a bull market.” “In recent weeks, individual investors have flocked to a few specific stocks, including GameStop, which has curtailed short selling.”
“Due to the absence of short selling, drop bets have already been delayed for stocks that have already high valuations,” he said. The former CIO decided, “This means that there will be a short-term shock to the Korean stock market when short selling for all stocks begins.”
The former CIO added, “It seems that populism by Korean politicians has led to a long-term ban,” he added. In April this year, Korea is facing a re-election and next year’s presidential election.
Traders are of the opinion that if they cannot sell short, they should use stock futures to hedge their exposure. Exposure refers to the amount of exposure to risk.
“There is not much evidence that banning short selling improves liquidity or reduces volatility in markets,” said Vince Lorso, manager of Changebridge Capital.