A Short-Selling Ban Makes Perfect Sense
South Korea’s market, dominated by stocks sensitive to global sentiment, has become an easy scapegoat for pessimism.
The long and the short of it.
Photographer: SeongJoon Cho/BloombergMarkets dominated by companies sensitive to global business cycles may have little choice when investors start to use them as a proxy for general pessimism. In that light, South Korea’s measure to ban short selling for six months, the first such restriction since 2011, isn’t as rash as it might seem.
The coronavirus outbreak came at the worst time for President Moon Jae-in. Only a few months ago, the Kospi Index finally came out of a deep bear market, characterized by steep conglomerate discounts and historically low trading turnover. Then the virus hit, hammering the benchmark index right back into bear territory. On a two-, five- and 10-year horizon, Korea’s stock market has consistently underperformed its north Asian peers of China, Japan and Taiwan.