Kim Young-ik "Total Ban on Short Selling: Positive Short-Term, Problematic Long-Term"

"Short Selling Helps Find the Fair Value of Companies"
"Korean Stock Market Undervalued... Banned Short Selling Leads to Further Rise"

Regarding the ruling party and the government’s announcement on the 5th to implement a 'complete ban on short selling,' economic expert Professor Kim Young-ik of Sogang University pointed out that "there are positive effects in the short term, but there could be problems in the long term."

On the 6th, on KBS's 'Choi Kang Sisa,' Professor Kim said, "The best effect of short selling is that it helps companies reach their proper valuation," adding, "Recently, some secondary battery stocks have risen significantly, but through short selling, the stock prices could have gone through a process of returning to their proper levels."

Professor Kim Young-ik of Sogang University Graduate School of Economics is giving a lecture titled "Global Financial Market Outlook - Crisis and Opportunity" at the 5th Asia Economy IPR Forum held on the 8th at the Press Center in Jung-gu, Seoul. Photo by Yoon Dong-joo doso7@

The secondary battery stocks mentioned by Professor Kim are widely regarded as having experienced significant price declines due to short selling. Among the secondary battery stocks, the representative company Ecopro surged intraday on the morning of the first day of the complete short selling ban, reaching 825,000 won, just shy of the upper limit price of 828,000 won.

At the same time, Professor Kim predicted that this measure could bring an upward trend to the undervalued stock market. He said, "In the past, there were three instances of a complete ban on short selling, and of course, since the stock prices were low at those times, the prices inevitably rose afterward, with trading volumes increasing and stock prices rising," adding, "Recently, our stock prices have been undervalued by about 10 to 20% compared to macroeconomic variables such as nominal GDP and broad money supply (M2)."

Professor Kim said, "Because our stock prices were undervalued, stocks could rise somewhat more due to the short selling ban than if there were no such measure," but he also questioned, "Why was such a complete ban imposed at this time? It seems there might be some political motives behind it," interpreting that there could be political intentions ahead of the general elections.

He also mentioned that short selling has long been criticized among investors as a 'tilted playing field.' He explained, "Foreigners and institutional investors found it relatively easy to borrow stocks to sell short and could borrow them for longer periods, whereas individual investors found it difficult to borrow stocks for short selling and the borrowing periods were short," adding, "So, among individual investors, there were talks about a 'tilted playing field.'"