Korean stocks surge after short selling ban

2023.11.07 13:29:01 | 2023.11.07 17:18:59

[Photo by Lee Chung-woo]이미지 확대

[Photo by Lee Chung-woo]

South Korean stocks soared Monday, after the financial authority banned short selling transactions until the end of June 2024, triggering foreign investors to buy secondary battery-related stocks, leading to a sharp increase in both the main Kospi and secondary Kosdaq markets.

On Monday, the benchmark Kospi closed at 2,502.37, up 5.66 percent from the previous trading day, while the Kosdaq closed at 839.45, up 7.34 percent.

Strong buying interest in the early trading session prompted the Kosdaq to trigger a sidecar at 9:57 a.m., suspending the effectiveness of program buying bids for 5 minutes.

This is the first time the sidecar has been triggered on the Kosdaq since June 16 2020, when stimulus measures were pouring in after the Covid-19 pandemic was declared. Individuals turned net sellers on both markets, while foreigners were net buyers of 704.9 billion won ($542.47 million) on the Kospi and 485.3 billion won on the Kosdaq.

It was the first time in about one year that foreign investors purchased more than 1 trillion won on both markets.

Institutions also showed a net buying trend.

The Kospi’s gain of 134.03 points on the day was the highest on record for a single day. The gain was the highest in 44 months since March 25, 2020, when it rose 5.89 percent.

Secondary battery stocks EcoPro Co. and EcoPro BM Co. hit the daily upper limit on the Kosdaq, while shares of LG Energy Solution Ltd. and POSCO Holdings Inc. surged 22.8 percent and 19.2 percent, respectively, from the previous trading day. POSCO Future M Co. also hit the daily upper limit.

“The ban on short selling played a seasoning role in boosting investment sentiment as favorable external variables drove passive funds (index-tracking funds) from institutions and foreigners,” said Jung Myung-ji, an analyst at Samsung Securities Co.

As financial authorities emphasize their determination to crack down on short selling, the market is expected to be greatly influenced by regulatory trends for the time being.

The Korean won, in the meantime, surged to the 1,200- won range against the U.S. dollar on foreign capital inflows amid growing expectations that the United States will end its monetary tightening.

The won closed at 1,297.3 won per dollar, up 25.1 won from the previous trading day. It is the first time in more than three months that the won has entered the 1,200 won range.

By Kim Je-lim, Lim Young-sin, Choi Hee-seok, and Yoon Yeon-hae

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