How One Country’s Ban Saved Short Sellers From Themselves
South Korea’s stock market is now a post-Covid star — and domestic day traders are setting the pace.
A bank dealing room in South Korea, a couple of weeks before the six-month short selling ban started
Photographer: Bloomberg
During the March selloff, markets sensitive to global business cycles scrambled to ban short selling. When I wrote an article agreeing with South Korea’s six-month ban, I got quite a bit of push-back. “Short-sellers aren’t driving markets down, it’s long sellers exiting their positions,” wrote one reader, who normally likes my columns.
Our savvy investor was right. Such a ban can hurt sentiments. Non-Korean long-short funds, for instance, need to hedge, or they can’t be in that country’s marketplace at all. But Covid-19 has thrown up all sorts of weird surprises. In fact, these days, it’s almost better not to be tempted with too many options. Sit tight or stay out; otherwise, you might just find yourself busy short covering.