As Korea Resumes Short-Selling, Stocks That Rose Most Take Hit

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Investors rushed to sell shares of some Korean biopharmaceutical companies which surged last year as the nation lifted the world’s longest pandemic-imposed short-selling ban on Monday.

The health-care sector slumped 4.9%, the biggest loser among Kospi 200’s sub-gauges. The group rallied 67% in 2020, the best performer of all. Drug developer Celltrion Inc. tanked 6.2%. HLB Inc. finished 4.2% lower as investors preemptively sold their holdings in the health-care company, according to Eugene Investment & Securities Co. analyst Han Byung-Hwa.

South Korea resumed short selling on Monday on 351 stocks on Kospi 200 and Kosdaq 150. That comes after a 13-month ban that was imposed during the market crash in March last year. During the past year, retail investors who fueled record gains in Korean stock market have feared the repercussions from short selling and have asked regulators to impose a permanent ban.

“Short-selling issues are affecting investor sentiment,” said Seo Sang-Young, a market strategist at Mirae Asset Securities Co. “Biopharma companies and battery makers that are overvalued relative to their earnings are seeing some selloff.”

Read more:

World’s Longest Short-Selling Ban Coming to an End in Korea

Retail Investors Vow War If Short Sellers End Korea Stock Rally

Short Sellers Have Plenty of Targets as Korea Ends 13-Month Ban

Fear Not the Lifting of Korea’s Short-Selling Ban: Taking Stock

Investors, especially the so-called market neutral active money managers who couldn’t sell borrowed stocks while the prohibition was in place, have begun to take short positions. A Seoul-based manager of a long-short fund shorted some stocks on Monday including display panel maker LG Display Co. as demand for consumer tech products will likely weaken in the second half, they said, declining to be named as it’s against their company policy to reveal short positions.

LG Display settled 0.8% lower after falling as much as 3.1%. It was the most shorted tech stock in the Kospi 200 Index, according to Korea Exchange data released after market closed.

Samsung Card Co., Hyundai Marine & Fire Insurance Co., Ottogi Corp., Lotte Corp. and Hanjin Kal Corp. were the five most shorted stocks on Kospi 200 on Monday, Korea Exchange’s data show.

Top 10 Most Shorted Stocks on Kospi 200 on May 3
Stock NameShort-Selling Vol. / Total Trading Vol.Share Price Move
Samsung Card Co.56.3%-4.7%
Hyundai Fire & Marine Insurance Co.45.6%-1.9%
Ottogi Corp.37.8%-1.1%
Lotte Corp.37.6%-5.1%
Hanjin Kal Corp.32.6%-8.8%
Hite Jinro Co.30.5%-0.6%
Hanwha Corp.30.3%-3.3%
LG Display28.9%-0.8%
Samyang Corp.28.8%-1.9%
Netmarble Corp.28.7%-2.7%
Source: Korea Exchange

Local stock benchmark Kospi and the blue-chip Kospi 200 index -- which counts the likes of Samsung Electronics Co. and SK Hynix Inc. as its members -- ended the session lower after fluctuating between gains and losses, following strong monthly exports data over the weekend. Kosdaq 150 slid 3.1% to the weakest in about two months.

Foreign investors shorted 738 billion won ($657 million) worth of Kospi stocks during regular trading hours on Monday, while local institutional investors shorted 63 billion won of shares, according to Korea Exchange. Retail traders sold 13 billion won worth of borrowed securities.

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