is a friendly economic time.
Today (the 21st) I will be with reporter Han Ji-yeon.
LG Energy Solutions' share price is falling a lot.
Is it last week?
They seem to be dropping enough to even give up the 2nd place in market capitalization, saying that this is because of the short selling.
Yes, the short selling coupled with the downtrend has a big impact. On the 11th, when LG Energy Solution was included in the KOSPI 200 index, short selling became possible.
There were 826 billion won short sale for five days after the incorporation, and the stock price fell by nearly 10% in a week, from 400,000 won to 300,000 won.
For those of you who don't know about short selling, 'Gong' in short selling uses the character 'Bill Gong', which literally means to sell stocks you don't own.
It is an investment method in which stocks are borrowed, sold, and then bought back after a certain period of time has elapsed.
Contrary to general stock investing, where you sell and make a profit when the stock price rises, you borrow and sell the stock and buy the stock when the stock price goes down, earning a profit from the market price.
It's a way to profit when the stock price goes down.
For example, if you borrow and sell stocks worth 1 million won per share, and a few days later, bad news occurs and the stock price drops to 800,000 won.
Currently, short selling is possible in the KOSPI 200 and KOSDAQ 150 stocks. Usually, the incorporation of the KOSPI 200 works as a positive for the stock price, but it can be seen that the short sale is rather poisonous to the stock price of LG Energy Solution.
In the end, the price of LG Energy Solution plunged because of the short sale.
Then, individual investors who subscribed to and invested in public offering stocks in the hope that the stock price would rise would have no choice but to hate short selling.
The fact that the power to short sell the stocks I own can be a signal, a signal that the stock price is going down.
In addition, as in the case of LG Energy Solution, when short selling becomes active, the stock price often crashes. This can lead to panic selling, a 'panic cell' in which ants sell out of extreme fear.
Recently, there have been many times of bearish markets due to the Ukraine crisis and US austerity.
When the downtrend is too severe, the government bans short selling for a certain period of time, and it has happened three times so far.
Short selling was banned during the global financial crisis in 2008, the European financial crisis in 2011, and the corona virus last year, but in May of last year, it partially resumed for KOSPI and KOSDAQ stocks.
Although short selling has side effects, it also has advantages.
It also serves to calm the overheating of the stock market and the 'bubble'.
The effect of increasing liquidity in the market, especially the inflow of foreign investment capital, is significant.
For this reason, almost all countries have implemented a short selling system.
And since it is essential for Korea to be included in the MSCI developed countries index, it is essential to allow short selling.
So in the end, this means that short selling cannot be abolished.
However, in the process of resuming after it was suspended due to the corona virus, it seems that there were quite a few voices such as "Clearly short selling is somewhat disadvantageous for individuals and advantageous for institutions and foreigners" and "In such a case, we need to change it." Are you saying it's being raised a bit?
Yes, it is.
Short selling in Korea is a much more favorable condition for institutions and foreigners than for individuals.
First of all, there is no such regulation on the maturity date that institutions and foreigners have to pay back when they borrow shares.
So, you can wait patiently for the stock to drop, but individuals have 90 days to pay off.
The second is the collateral ratio, that is, the ratio that must be kept as a balance when borrowing stocks. Institutions and foreigners only need 105%, but individuals are applying 140%.
Finally, while institutions borrow stocks from large financial institutions such as the Korea Securities Depository, individuals must trade through brokerages with relatively few stock types and quantities.
Due to these unequal factors, it is not easy for individuals to aggressively short short. Ultimately, if short selling needs to be fully expanded, individuals should be able to actively utilize short selling.
The new government said it would adjust the short selling system that alienates individuals to match equity.
In addition, he said that he would introduce a 'short selling circuit breaker' that automatically blocks short selling when stock prices drop excessively and install a monitoring mechanism to check illegal short selling in real time.Keywords: