The move, which took effect Monday, marks the first time since March 2020 that investors will be permitted to short sell any security on the country’s exchanges.
During the suspension, regulators introduced a series of structural reforms, including a centralized monitoring system and adjustments to settlement periods and collateral requirements for investors.
Authorities have also pledged to implement temporary safeguards to cushion potential market volatility.
Until the end of May, the Financial Services Commission will expand its criteria for designating stocks as “overheated” — a classification that can restrict short-selling activity when certain thresholds of volume or price movement are triggered.
“While short-term volatility may rise in stocks with valuation concerns, the broader reopening of short selling is a positive step for market maturity,” said Lee Kyung-min, an analyst at Daishin Securities. “It will help attract more balanced foreign capital, both long and short.”
Short selling — a practice in which investors sell shares they have borrowed, aiming to buy them back later at lower prices — has long sparked debate. Proponents argue it plays a critical role in price discovery and correcting overvaluations. Critics, however, say the tactic can amplify market instability, especially during periods of stress.
The return of short selling comes as South Korea seeks to enhance the credibility of its capital markets ahead of a potential upgrade to developed-market status by global index providers — a move that could open the door to greater international investment.
reporter
Kim Dong-young
davekim0807@ajupress.com
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