[Good Morning Stock Market] Short Selling Resumption D+1... Did You Have a Good Dream?

On the first day of the partial resumption of short selling on the 3rd, the KOSPI index is displayed on the electronic board in the dealing room of Hana Bank in Euljiro, Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Junho Hwang] Investors who spent a restless night due to the resumption of short selling on the 3rd greeted the morning. The securities industry analyzed that the 0.7% drop in the KOSPI and the 2.2% drop in the KOSDAQ indicated that the impact of short selling was very limited. There are even opinions that the market bottom was found after the resumption of short selling. On the 4th, the market is expected to open amid a mix of external issues, led by the short selling resumption issue.

After the resumption of short selling the previous day, the daily returns of KOSPI200 and KOSDAQ150, where short selling became possible, recorded -0.5% and -3.1%, respectively. Since the KOSPI fell more than the KOSPI200, it can be seen that the impact of short selling on large-cap stocks was not significant. Rather, the impact on small and mid-cap stocks seemed to be greater.

However, it cannot be concluded that only short selling affected the market the previous day. Foreign investors, one of the two forces behind short selling, net sold about 440 billion KRW of KOSPI spot stocks. They sold top market capitalization sectors such as pharmaceuticals, transportation equipment, electrical and electronics, and finance. However, this appeared to be largely due to program trading (470 billion KRW). The global stock markets also showed a downward trend the previous day. Taiwan and Hong Kong stock markets fell by 2.0% and 1.4%, respectively, while China and Japan were closed.

Researcher Donggil Noh of NH Investment & Securities Research Center said, "The impact of the short selling resumption event on the direction of large-cap indices is expected to remain limited in the future," adding, "Before the short selling ban, the short selling transaction amount was around 1 trillion KRW based on KOSPI, whereas on the 3rd, the KOSPI trading volume was 33.6 trillion KRW, which is sufficient to absorb the short selling volume."

Researcher Hainhwan Ha of KB Investment & Securities Research Center analyzed, "The cause pointed out for the market correction is the resumption of short selling," adding, "The unusually large drop in the Korean stock market compared to global markets and the limited movement in the won-dollar exchange rate support this judgment." He stated that if there are other causes, they could serve as a benchmark to estimate how much the short selling resumption material will affect the market.

Researcher Ha added, "The current market, lacking external negative factors comparable to those in 2009 and 2011 when short selling was resumed, is judged to have already entered a bottom phase."

The US stock market, which influences the Korean market, started higher as the sharp increase in German retail sales highlighted the expansion of economic recovery from the US to Europe. However, the rise was limited due to a surge in COVID-19 cases in India. The differentiated market continued as some companies, including Tesla (-3.46%), showed weakness due to individual factors. The Dow Jones Industrial Average closed at up 0.70%, Nasdaq down 0.48%, S&P 500 up 0.27%, and Russell 2000 up 0.49%.

This content was produced with the assistance of AI translation services.