Starting from March 16, South Korea of Financial Regulator will ban short selling. In addition, it is in the list of shares on the Kospi and Kosdaq. The prohibition is to curb speculative trading as the economic blow from the coronavirus outbreak widens. This will take for six months since the pandemic spread the world.
South Korea is suffering from the region’s biggest COVID-19 epidemic outside of China. With more than 7,900 cases in South Korea, although authorities are cautiously seeing a downward trend in daily increases.
The Korea Exchange activated trading curbs on the nation’s stock market on Friday for a second day to calm investors panicking after U.S. equity markets on Thursday suffered their worst day since the 1987 “Black Monday” crash.
According to Reuters, the clampdown comes as Seoul’s benchmark index, the Kospi, plunged 13.2% this week, in its biggest drop since October 2008, even as President Moon Jae-in promised to offer “unprecedented measures” to help Asia’s fourth-largest economy cope with the coronavirus on Friday.
The Financial Services Commission said the decision to ban all short selling is the strongest step. It has taken to address equity market volatilities, to stem any herd-like behavior.
Short selling is when a trader borrows a company’s shares, typically from a broker, to sell them in expectation the price will fall.
The trader then profits from the price decline when they repurchase the shares later to return them.
FSC official said “We have taken similar measures in 2008 for eight months. But, that was originally intended for three months which was extended twice. So a six-month ban on short-selling is the strongest measure we have taken so far.”
