Short Selling Still a Tilted Playing Field... Individual Lending Possible Stocks Only 0.00045% of Total

[Asia Economy Reporter Ji-hwan Park] Although short selling partially resumed in the domestic stock market from last May, the amount of stocks available for individual investors to borrow (loanable stocks) remains woefully insufficient compared to institutions.

According to data submitted by the Financial Supervisory Service to Min Hyung-bae, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, as of the end of June this year, the loanable stocks for individuals amounted to only 1,817 shares. This accounts for just 0.00045% of the total shares (402,729,875 shares). The remaining 402,728,058 shares (99.99955%) are loanable stocks available to institutions.

In the first half of this year, the number of individual investors who subscribed to credit loan services or borrowing services from securities firms to lend stocks was 18,880. This is four times higher than the 4,587 institutions that borrowed stocks from securities firms. Short selling is an investment technique where stocks are first borrowed and sold when a price drop is expected, and then repurchased at a lower price to realize a profit.

Before the resumption of short selling, financial authorities announced plans to expand the number of securities firms providing credit loan services from six to seventeen and to increase the loanable stock volume. The value of individual short selling orders has shown a clear upward trend, increasing from 221.9 billion KRW in 2017 to 766.8 billion KRW in 2018, and 888.6 billion KRW in 2019. As individual short selling orders continue to rise steadily, there is a high possibility of further growth.

Assemblyman Min Hyung-bae stated, "Despite the positive functions of the short selling system, distrust remains high due to dissatisfaction with the uneven playing field between individuals and institutions," and emphasized, "Financial authorities must strive to create a market environment where individual investors are not disadvantaged by short selling."

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