Credit: Public domain.
On March 31, the Financial Services Commission 금융위원회 lifted the ban on short selling introduced in November 2023 in a transparent attempt by the Yoon Suk-yeol 윤석열 administration to pander to day-traders ahead of the April 2024 General Election 총선거. At the time, the measure was criticized as a retrograde policy that took back South Korea’s capital markets back to the 1990s. (See previous coverage, “Finance Regulator Sacked Over Short Selling Ban.”)
The first day of trading with short selling saw a significant drop in major indices. KOSPI dropped by 3.0%, while KOSDAQ dropped by 3.01%. Short sellers focused on the EV battery industry, with major manufacturers like Ecopro 에코프로 (12.59%) and LG Energy Solution LG 에너지 솔루션 (6.04%) suffering major drops. However, analysts expect that the resumption of short selling will lead to appreciation in the long term by incentivizing more international investors to inject capital into South Korea’s stock market.