South Korea’s KOSPI Soars 5.66% as Investors Cheer on Short-Selling Ban

South Korea’s KOSPI closed at 2,502.37 with +5.66% gain for today (6 Nov), its best performance in nearly four years after Financial Services Commission Chairman, Kim Joo-hyun reimposed short-selling ban on the main index KOSPI 200 and tech index KOSDAQ 150, citing the illegal naked short-selling and calls from some investors that saw massive loss from limited options.

The ban was not something new in South Korea as this was the fourth time of the ban. Regulators imposed a temporary ban in 2008, 2011 and 2020, following major global crises that occurred during that period of time, which were the Global Financial Crisis, the European Liquidity Crisis and the Covid-19 pandemic, respectively.

The KOSPI 200, the tech-heavy KOSDAQ150 and small-cap Konex were on the list since 2020, but regulators made a temporary exemption in May 2021, allowing some large-cap stocks in KOSPI 200 and KOSDAQ 150 to be able to traded, while bans on other stocks remained intact.

The Stock Exchange added some regulations in October 2022, stating that the new regulations were implemented to monitor stocks that showed a short selling ratio of more than 30%, fall over 3% in price, and show at least double of a short selling volume. These conditions could trigger a one-day ban, and could extend to three days if the daily decline in the price of the stock exceeds 5%.