Publish the schedule of “South Korea Stock Market” prohibiting “short selling” transactions several times.

the main points :

• South Korea detected short selling transactions during 2023 on November 6, 2023, and they were banned until June 30, 2024 (naked short selling transactions were found in the previous period of 2023).
• The Thai stock market has the highest percentage of short sale value in the last five years, in 2023, where the short sale value compared to trading value is 10.59% or moving at -15.15%.
• As recently as January 2024, the Thai stock market had a ratio of short sale value to trade value of 12.00% or moving at -3.63%.

Issues that trend in a situation where the stock market is performing poorly. One of them is clearly inevitable. Short sale transactions are transactions in which the seller borrows shares from securities companies or institutions that provide stock lending services. Short sellers are required to place a security deposit (margin) with a stock lending company. Including paying short sale fees on a daily basis until the short seller returns the borrowed amount of shares (closing the short), or any borrowing of shares to sell first. Short selling is a short sale transaction carried out by the seller who does not have it. He does not borrow the shares, but you can send Sell ​​orders.

Apichai Raumanachai, Securities Analysis Department, Kingsford Securities Pvt Ltd revealed that in practice, do short selling transactions cause the market to decline or not? Overall, the issue is still complex with many variables, such as the underlying conditions of companies listed on the market at the time, liquidity generated by short sale transactions, etc.

An example of a case study of short sale transactions is the case study by Pepper and Pagano entitled “Short selling bans around the world: evidence from the 2007-2009 crisis”, which is an examination of the ban on short sale transactions in several countries during the subprime crisis: a consequence The conclusion is that the ban on short selling transactions leads to a significant reduction in market liquidity. There is no evidence that short selling bans have a positive impact on stock prices in most markets in more than 30 countries, except in the case of the US stock market where there is a positive relationship.

In theory, short selling will create selling pressure which is one of the controls that prevent the price from being in the overpriced zone, but the negative impact on the market may not be much of a control over the amount of short selling either. A short seller can borrow, but naked short selling is much worse. Because it will cause exaggerated selling pressure from a supply of shares that does not actually exist. As a result, the prices of stocks that were selling under pressure fell at a greater rate than usual. Not surprisingly, naked short selling has become illegal in most countries.

Breaking the law or observing a breach of the law is still common in foreign markets, e.g

1. In the case of South Korea where exposed short selling transactions were detected during 2023.
2. In the case of GameSpot shares in the US, where 140% of shares were shorted in 2021.
3. The state of US Dendreon stock in 2020

However, if we are talking about the recent ban on short selling transactions, we should talk about the South Korean stock market, where short selling has been banned several times. The last one was banned on November 5, 23 (until the end of June 24)

Regarding the impact of the latest ban, it was found that on the first trading day one day after the ban was announced (announced on Sunday, November 5, 2023, first trading day on Monday, November 6, 2023) the KOSPI index was adjusted +6% and during the period from November 3 – December 31, 2023 + 12% If we consider a data set of 38 columns before and after the ban, it turns out that the trading volume during the period from November 6, 2023 to December 28, 2023 will be lower than it was during the period from September 6, 2023 to November 3 Y 66 by about -7%

As for short selling in the Thai stock market, the percentage of short selling value is according to the following table.

It can be seen that if we only consider the short selling factor, it cannot be concluded that it has a negative impact on the direction of SET's movement if we do not take into account other factors such as the profits of companies listed on the market. Market, foreign fund flows, etc.

In this regard, the short sale transaction as a whole remains controversial. Is it more positive than negative? But it will be noted that in many markets, short selling measures have been used as a tool in situations where the market is very volatile, such as the subprime mortgage crisis or the ban on short selling in South Korea in 2023 after naked short selling transactions occurred, etc. .

He believes that short sale transactions in normal times are a good market tool that creates price balance and helps with liquidity.

However, the question that inevitably arises today is whether the market at this time is normal or not? And unusual situations: Will the issuance of measures to control short selling operations (whether a ban/or a specific ban) have a negative impact on liquidity, which is likely to decrease more than the benefit?