Restrictions on short-selling likely extended

Remarks on a possible extension of a six-month ban on short-selling is refueling controversy over the measure. The government’s ban which went into effect on March 16, is set to come to an end on Sept. 15, but recent remarks by the Financial Services Commission chief have implied the ban could be extended.

"We will take into consideration the ongoing COVID-19 pandemic," FSC Chairman Eun Sung-soo said about the possibility of extending the measure, at the National Assembly last week.

About the remarks, an FSC official said Monday, “The decision will be made after holding a public hearing Aug. 13 on the matter, which will be attended by figures from academia and the private sector.”

Financial authorities imposed the ban on short-selling when the stock market took a plunge in March, triggered by the spread of COVID-19. The KOSPI index fell below 2000 on March 9, dropped 1900 on March 12 and plunged 1800 on March 13. Short-selling surged during this period.

Short-selling is an investment method through which borrowed shares are sold in the hope that investors can profit from a price fall and buy the shares back at a lower price.

Individual investors claimed short-selling led to a greater overall fall in the prices of shares.

The ban on short-selling is seen to have helped Korea’s main bourse’s restoration to preCOVID-19 levels.

The benchmark KOSPI rose 54.4 percent as of the closing, Monday, from the lowest point on March 19, and the secondary KOSDAQ surged 93 percent.