(2nd LD) S. Korea to lift ban on short selling of non-financial stocks

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SEOUL, May 20 (Yonhap) -- South Korea's financial watchdog said Wednesday it will
allow short selling of non-financial stocks starting next month amid signs that
global financial instability is easing.

The Financial Services Commission (FSC) imposed the ban on short selling, or sale
of shares by borrowing them in anticipation of price falls, in October to keep
the trading practice from battering the local bourse amid global financial
turmoil.
"The watchdog will eliminate a ban on short selling on non-financial shares
starting June 1. But the ban on financial shares will be retained for the time
being, given uncertainty in the financial markets," the FSC said in a statement.
The move comes as global stock markets, hit hard by the collapse of Lehman
Brothers, have markedly stabilized amid budding signs that the global economy may
be reaching its bottom. South Korea's key stock index now hovers above the
1,430-point mark after tumbling below the 900-point level in late October.
South Korea joined moves by major countries, including the United States and
Britain, to lift a ban on short selling.
South Korea still does not allow so-called "naked short selling," in which
investors unload shares which they do not own, but only permits investors to sell
borrowed stocks.
"A ban on short selling of financial stocks will be retained. Although the
financial markets are stabilizing, the global financial turmoil has yet to end,"
Hong Young-man, director-general at the capital markets bureau of the FSC, told a
press conference.
The FSC added it will lift a ban on financial shares after further monitoring the
market's condition.
Analysts said the easing of the ban would have a limited impact on the Seoul
stock market, shrugging off concerns that market volatility may increase.
"As the Korean bourse is on the upward trend, the elimination of the ban might
have a muted effect on the market," said Lee Sun-yup, a market analyst at
Goodmorning Shinhan Securities Co. "Rather, the move points to signs that the
market is stabilizing."
sooyeon@yna.co.kr
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