![Traders on the New York Stock Exchange in the U.S. are signing order transactions on the 4th (local time). On this day, the New York Stock Market closed the rise of three major indices, including the S&P500, thanks to improvements in the US unemployment index. [AP = 연합뉴스]](https://i0.wp.com/file.mk.co.kr/meet/neds/2021/02/image_readtop_2021_124103_16125179304532935.jpg?w=560&ssl=1)
Traders on the New York Stock Exchange in the U.S. are signing order transactions on the 4th (local time). On this day, the New York Stock Market closed the rise of three major indices, including the S&P500, thanks to improvements in the US unemployment index. [AP = 연합뉴스]As the South Korean government announced a re-extending measure of the ban on short selling, warnings are growing that foreign funds may escape.
Bloomberg’s report on the 4th is an example that shows that this current is gradually spreading in the global market. With all short selling allowed in advanced stock markets, Korea is stigmatized as a country that has been banned from short selling for more than a year, and fears that it will be neglected by foreign investors. In this case, it is analyzed that the entry of the domestic stock market into advanced markets is inevitable. In terms of the size of holdings, foreigners have a great influence, accounting for about 30% of the domestic stock market.
What is right now is the possibility of reducing the proportion of Korea in the MSCI Emerging Countries Index. It is analyzed that they are in a situation where they have to worry about the possibility of reducing the proportion of Korea rather than entering advanced markets. The MSCI Index, which is used by global investors, does not include countries that are prohibited from short selling in the developed countries index, and if short selling is prohibited for a long period of time for more than one year, it is used as a deduction factor in the evaluation of adjusting the country-by-country ratio. MSCI changes regularly every quarter (February and August) and half year (May and November). On the 5th, Kang Hyun-ki, a researcher at DB Financial Investment, said, “Before the MSCI semiannual review (May 13th), short selling in Korea will resume.”
The proportion of foreign investment in the Korean stock market is slightly more than 30% of the market capitalization. Among the funds following the MSCI Emerging Countries Index, Korea accounted for 13.4% of about 3,570 trillion won. Lee Kyung-min, head of the investment strategy team at Daishin Securities, said, “On the 10th, the expiration date of index and individual stock options is expected to lead to volatility in the Korean stock market.”
A senior official at a domestic securities company who requested anonymity said, “The ban on short selling is a factor that makes foreign investors reluctant to inflow to the Korean stock market. When setting up a mezzanine fund, foreigners always take a short position (taking a short selling position). , As a result of this measure, transactions established through existing short-selling positions will become difficult, and foreigners who had in mind the resumption in mid-March will think of policy reliability as an investment risk.”
In this regard, according to the Korea Exchange, on the 1st to 4th of this month, foreigners net sold 1.93 trillion won worth of won in the Korean stock market futures market. In the options market, put options betting on a decline were net bought for a total value of 12,4373.32 million won, and call options that bet on an increase were net sold worth 3.574.95 million won.
Nadar Naimi, chief market strategist of AMP Capital, a fund management company based in Sydney, Australia, said, “It is a surprising decision to extend the short selling ban even though the Korean stock market is bullish.” “As an unintended result, market liquidity could drop sharply.” Due to the corona 19 crisis in China last year, the government issued a stimulus package and the Bank of Korea frozen the benchmark interest rate at 0.50% per year, which instilled market liquidity, but the re-extending ban on short selling had a side effect that partially offsets the stock market decline. It is from the analysis that it increases risk.
On the other hand, about whether the resumption of short selling is negative for the stock market, Vince Loruso fund manager at Changebridge Capital in Boston, USA, told Bloomberg, “There is a lot of evidence that the ban on short selling will increase market liquidity or decrease volatility. He pointed out, “If the ban on short selling is prolonged, the important means and methods of forming a fair share price based on fundamentals will disappear from the market.”
An official from the Financial Services Commission, who also requested anonymity, pointed out that “until the beginning of last month, the Financial Services Commission agreed to ban short selling only until mid-March as planned, and gave a signal to the market, but the atmosphere changed rapidly.” On the 11th of last month, the Financial Services Commission sent a text message to the industry stating that’the ban on short selling is scheduled to end on March 15th’, but on the 3rd of this month, less than a month after this, the “short selling ban will be banned again until May 2nd.” I will extend it.” Insisting that the ban on short selling should be extended around the ruling party, including Yang Hyang-ja and Kim Byung-wook, as well as Democratic Party lawmakers, and Prime Minister Jeong Sye-gyun said at TBS’Kim Eo-jun’s News Factory’, “I personally think short selling is a bad system. On the 18th, after remarking, “I can’t talk clearly about the resumption of short selling,” said Eun Seong-soo, chairman of the Financial Services Commission, which confuses the market. Samsung Securities’ credit loan service was temporarily suspended again on the 3rd, when the government announced a renewal of the ban on short selling amid controversy over short selling. The fact that the service, which resumed this week, was stopped after only three days suggests that there is a lot of demand from individual investors who are engaged in’debt investments’. Meanwhile, an official from Kiwoom Securities said, “The method of managing credit loans differs for each brokerage company, but the atmosphere that individual investors’ demand does not subside is similar,” he said.
[김인오 기자 / 신유경 기자]
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