AUTHORITIES MULL SHORT SELLING BAN

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The stock trading method of short selling only brings profits when stock prices fall. With the stock market struggling lately, there are calls for short selling to be banned for individual investors, who have sustained losses. Financial authorities say they might consider it.

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The KOSPI has plummeted about 20 percent since the start of this year. Individual investors say short selling is one of the reasons behind the falling stock prices. Short selling is done by borrowing and selling stocks first and paying for them later. Profits can be reaped only if stock prices fall. In other words, investors using this trading method expect share prices to plummet.

[Soundbite] Jung Eui-jung(Korea Stockholders Alliance) : "Many investors are outraged by their personal experience of losing money."

Financial authorities say they might consider imposing a ban on short selling as a safety measure. When stock prices plunged due to the pandemic, short selling was banned for over a year from March 2020.

[Soundbite] Kim Joo-hyun(Chair, Financial Services Commission(July 11)) : "Short selling is banned overseas when the market changes rapidly. We're also going to take this measure according to the situation."

But there are doubts over whether banning short selling alone is enough to prevent stock prices from falling.

[Soundbite] Lee Hyo-seop(Korea Capital Market Institute) : "There is no significant price difference between stocks that were banned from short selling and those that were not. It would be difficult to say that short selling causes stock prices to fall."

One of the factors to consider is whether it's right to permit short selling only for blue-chip stocks with large market capitalization. If such a ban fails to raise stock prices, some say it can still prevent their further decline, meaning it could help discourage individual investors from dumping their shares to some extent.