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Biz News Korea(Eng)

Foreign investors’ short selling only increases after disclosure system

Collected: 2016.09.28

Distributed: 2016.09.29

Source: Go Direct

The new disclosure requirement on short-selling under effect since June 30 designed to enhance transparency in such trade and curb speculative selling by foreign investors have been doing the opposite. Foreign short-selling remains unfazed because of loopholes in the new regulation.

Disclosures for short-selling position by foreign nationals numbered 445 cases as of Sept. 21, up from 400 cases three months ago, according to data compiled by the Maeil Business Newspaper on Tuesday. Foreign investors made up for 97.4 percent of total short-selling disclosures, increasing from

During the same period, Korean institutional investors reported 12 cases of short-selling transactions, down from 14 cases three months ago.

Morgan Stanley topped the list in the number of short-selling disclosures, representing 254 cases or 55.6 percent of the total. Other foreign stock brokers like Merrill Lynch, Goldman Sachs, UBS Credit Suisse and JPMorgan were in the top 10 list. Only Deutsche Bank saw its short-selling disclosures shrink to 17 cases from 24 cases in the three-month period.

Stock investors are required to report their short-selling trade details if their short-selling balance exceeds 0.5 percent of outstanding shares or more than 1 billion won (roughly $860,000). But critics say the system is not working as it should.

One major problem is many foreign investors use swap deals with their stock brokers to hide their actual identity and portfolio strategy. In addition, the current system makes post-disclosure changes elusive. Some say the current penalty structure is too low to compel companies to take the system as seriously as they should.

By Choi Jae-won

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