FLUCTUATIONS WITH SHORT SELLING RESUMPTION

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The ban on short selling has been partially lifted. The benchmark KOSPI fell slightly, while the tech-heavy KOSDAQ plummeted more than 2 percent. The short sale trading amount surpassed 1 trillion won, coming mostly from foreign investors.

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Tensions are running high on the first day of the return of short selling with authorities keeping an eye on illegal trading.

[Soundbite] Lee Jae-hoon(Korea Stock Exchange) : "We are monitoring shares whose short sale trading volume is abnormally high."

The resumption of short selling has had a profound impact on the KOSDAQ market. Even actively traded shares with a high market value have plunged about 5 percent. Most of them are from the bio and IT sectors.

[Soundbite] Kim Dae-jun(Korea Investment & Securities) : "Many growth stocks are included in the KOSDAQ. If overvalued shares are shorted, the impact on the KOSDAQ will be undoubtedly stronger."

The KOSPI market, on the other hand, is more influenced by overseas stock markets rather than the resumption of short selling. Experts say it's unlikely to be affected seriously. When short selling was first banned in 2009, the KOSPI surged nearly 15 percent three months after its resumption. When short selling was banned for the second time, the KOSPI rose 5 percent during the same period.

[Soundbite] Noh Dong-kil(NH Investment Securities) : "Interest rates and economic indices have a greater influence in the long to medium term rather than short selling."

But retail investors seem to disagree. That's because the top 150 shares for which shorting is now permitted have lost more in value than the overall decrease in the KOSDAQ market. Financial authorities have vowed to take the sternest measures possible against illegal short selling, including penalties of up to double the value of traded shares.