"Not the Bottom Yet"... Short Selling Ban Debate 'Gently Rising'

[Asia Economy Reporter Ji Yeon-jin] Although the KOSPI's psychological resistance level of 2500 has fallen, there are still forecasts that it is not the bottom yet. This is because policies that typically appear at the bottom have not yet emerged, and market indicators remain higher than previous lows.

On the 15th, Hana Financial Investment pointed to the short-selling ban policy as a signal of the KOSPI bottom. During the crash caused by the COVID-19 pandemic in March 2020, the KOSPI hit a low of 1482.46 on March 23, and a short-selling ban was implemented for six months starting from March 17.

In early March 2020, short-selling trading volume accounted for nearly 10% of the KOSPI trading volume, but with the full ban on short-selling, short-selling trading volume disappeared. During this period, the KOSPI successfully rebounded, even surpassing 3300 on July 6 last year. Lee Kyung-soo, a researcher at Hana Financial Investment, said, "Short-selling trading resumed on May 3 last year after the temporary ban was lifted, and since then the index began to decline. During periods of increased index volatility, a surge in short-selling amid a lack of supply-demand foundation can cause further index declines," adding, "Among index stabilization policies, the ban on short-selling played a very decisive role in establishing the index bottom."

Previously, during the global financial crisis triggered by the Lehman Brothers collapse in the U.S., the KOSPI bottomed one month after the short-selling ban policy was implemented on August 10, 2011. For this reason, Lee argues that whether a 'short-selling ban policy' is in place can be used to gauge the index bottom even in the current inflation concern market environment.

Additionally, during the 2020 crash, the KOSPI's one-year forward price-to-earnings ratio (PER) was 8.1 times, and at the index bottom in 2020, the KOSPI's one-year forward PER was 8.1 times and price-to-book ratio (PBR) was 0.61 times. Currently, these stand at 9.1 times and 0.9 times respectively, which are still higher than the bottom levels. The ratio of credit loan balance to KOSPI market capitalization also rose from 0.7% (6.8 trillion KRW) in March 2020 to 1.0% (22 trillion KRW) now. The researcher said, "Currently, we are still far from the environment of the true bottom."

Financial authorities are also monitoring the market situation as global stock markets plunge together due to inflation effects. However, a Financial Services Commission official said, "We are not yet considering market stabilization measures such as short-selling bans."

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