91% of the share of short selling of KOSPI 200 and KOSDAQ 150… Virtually full resumption
Stock futures selling available… Low possibility of sudden change in stock price after short selling resumes
[서울=뉴스핌] Reporter Jung Kyung-hwan = Short selling, which has been banned for over a year, will resume in May. While the impact of the stock market has emerged as a concern when short selling is resumed, experts predicted that there would be little concern about a sudden change in stock prices after the resumption.
According to industry sources on the 4th, even if short selling for the KOSPI 200 and KOSDAQ 150 stocks resumes on May 3, it is expected that the stock market will not be affected significantly.
Truststone Asset Management Manager Dong-Hyun Lee said, “There will be no big change,” he predicted, “Because it is possible to sell stock futures, large stocks will not have a big impact on that.”
Even if short selling was banned, futures selling could be used as a hedging tool, meaning that even if short selling resumes, there is no immediate concern about the immediate impact of the stock market.
“For foreigners, short selling was already set, and after that, short selling was banned, and the stock market continued to rise,” said Lee. “Therefore, the selling position must have increased, so there must have been a process of reducing the spot. Probably so far. That would have been included in the foreign sale.
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| Members of the Korea Stock Investors Association are holding a picket demonstration on January 27th, urging the abolition of short selling in front of the government office in Seoul. [사진=김학선 사진기자] |
The Financial Services Commission decided to resume short selling trading on the 3rd of the same month from large stocks, which are included in the KOSPI 200 and KOSDAQ 150 indexes, after extending the ban on short selling for 45 days until May 2nd. The ban on short selling for the rest of the stocks will be extended indefinitely, and whether or not to resume and when will be decided in the future.
From May 3 this year, short selling of 200 stocks (22%) out of 917 KOSPI stocks and 150 stocks (10%) out of 1470 KOSDAQ stocks will be possible.
In addition, short selling for the KOSPI 200 and KOSDAQ 150 will be resumed and individual investors will be able to short sell. However, for individual investors who make short selling for the first time, the initial investment limit was set at 30 million won. Prior training is also required.
On the other hand, although the government decided to allow the resumption of short selling only for large stocks, it was pointed out that the share of short selling for the KOSPI 200 and KOSDAQ 150 stocks in the domestic stock market accounted for about 90% of the total, which is not different from the full allowance of short selling.
According to DB Financial Investment, as of March 15, 2020, just before the ban on short selling, the transaction amount for short selling in the domestic stock market for the last 60 days was 35.4 trillion won, of which KOSPI 200 was 25 trillion won (70.7%), The KOSDAQ 150 is worth 6 trillion won (17.0%). Major index constituents accounted for 90.9% of the trading value of short selling for the last 60 days.
Seol Tae-hyun, a researcher at DB Financial Investment, said, “There are about 350 stocks for which short selling is resumed, but the share of short selling transactions in the market is about 90%.”
Actually, Celltrion (KRW 1.826.7 trillion), Netmarble (KRW 144.5 billion), LG Display (KRW 127.4 billion), Hotel Shilla (KRW 101.9 billion), Korea Shipbuilding & Marine Engineering (KRW 77.3 billion), etc. All of them are Kospi 200. Lotte Tourism Development (6.78%), which has the largest proportion of short selling to the market capitalization, and Doosan Infracore (4.99%), the second place, have been incorporated into the KOSPI 200.
In the KOSDAQ market, including HLB (KRW 2679 billion), which has the largest short selling balance, KMDU (KRW 1746 billion), Pearl Abyss (KRW 90.9 billion), Helix Miss (KRW 22.3 billion), and HLB Life Science (KRW 22.1 billion) All of the top 10 stocks, including the KOSDAQ 150 stocks.
Ahn So-eun, a researcher at IBK Investment & Securities, said, “There are still concerns about overheating in the stock market, but based on favorable liquidity, supply and demand conditions, and expectations for an economic recovery, the period and breadth of the stock market adjustment will be limited.” As the resumption approaches, uncertainty will emerge again. After the resumption of short selling, it will ultimately determine whether the stock market is overheated by investors at that point.”
He added, “If concerns over overheating are alleviated through this adjustment phase, the downside risk from resuming short selling in early May is not great,” he added.