South Korea’s Financial Authorities on Tuesday said they will tighten regulations on stock short selling as part of market stabilisation measures amid increased fluctuations sparked by the outbreak of the new coronavirus and a slide in global oil prices.
Finance Minister Hong Nam-ki said the government would temporarily ease its requirements for the designation of certain shares subject to a possible ban on short selling.
The decision came in a meeting of economy-related ministers and officials held in Seoul.
The authorities, under the temporary step, would be able to designate shares subject to a possible ban under eased requirements for the next three months.
“When a firm is named risky or overheated due to short selling, short selling of its stocks will be banned for 10 trading sessions,’’ the Financial Services Commission said shortly after the local stock market closed.
Vice Finance Minister Kim Yong-beom also told newsmen that the government would swiftly and boldly take additional market stabilisation measures if necessary.
The move followed heavy losses in the local stock market, believed to have been caused partly by massive short-selling by foreigners and institutions that apparently expect additional drops in local stock prices.
The benchmark Korea Composite Stock Price Index (KOSPI) plunged over 4 per cent on Monday to close at a six-month low of 1,954.77.
Foreign investors sold a net 1.3 trillion Won (1.1 billion dollars) on Monday alone, the highest amount since the Seoul bourse operator began tracking such data in 1999.
U.S. stock market also crashed, with the Dow Jones industrial average plummeting 7.79 per cent in the face of the spread of the coronavirus and a sharp decline in oil prices.
Kim partly blamed the new coronavirus for fluctuations in global markets.
“The fast spread of COVID-19 and its unpredictability are factors that boost uncertainties in global markets.
“The volatility in the global financial market is expected to continue for some time depending on how the current situation unfolds in the future,’’ the vice minister added.
South Korea has reported over 7,400 cases of the novel coronavirus since confirming its first case Jan. 20.
