South Korea Bans Short Selling: The financial regulator of South Korea has decided to ban short selling in the stock market there. The Financial Services Commission of South Korea has imposed this ban which will remain in effect till June 2024.
South Korea’s decision to ban short selling will be applicable to all stocks listed on the stock exchange there. Elections are going to be held in South Korea in 2024. But cases of illegal naked short selling by global institutional investors were being seen in the domestic stock market. In such a situation, to please the retail investors before the elections, it has been decided to ban short selling.
The regulator there has also indicated to take action against foreign institutional investors for illegal short selling. In this short selling, short selling of shares is done without purchasing the shares or without confirming that the shares will be purchased in future. The regulator does not allow naked short selling in India. The regulator says that by June next year, the Financial Services Commission will work to tighten the regulation of short selling.
Short selling is becoming a major election issue in South Korean politics. Even during the Corona epidemic, South Korea’s regulators had banned short selling so that the stock market could be boosted. This ban was withdrawn by the regulators of South Korea in 2021.
And yet when regulators banned short selling, there was a rise in the stocks of companies listed on South Korea’s exchange Kospi. The term short selling came into discussion in India with great enthusiasm in January 2023. Short seller Hindenburg released a report accusing Adani Group of unethically driving up share prices. Hindenburg did short selling in Adani Group’s stock.
After which there was a sharp decline in the stocks of Adani Group companies listed in the stock market. It is believed that Hindenburg made huge profits by shorting the shares of Adani Group. The market cap of Adani Group had fallen by $140 billion. Whenever any negative news comes in the market about any company or sector, short selling increases. Short selling was banned in India in 2001.
What is short selling?
Short selling is a way of trading in the stock market. Under short selling, any investor sells the share at a higher price and buys it back when the share price falls below. The difference between the higher price at which the share was sold and the lower price at which the share was bought is the profit of that investor.
That is, any investor does not make profit in the market only by buying shares, but can also make profit by selling shares without buying them, this is called short selling. In India, the regulator has allowed short selling in futures and options along with cash.
