South Korea may consider eliminating a ban on stock short selling ahead of schedule if the market regains its stability, the top financial regulator said Friday.

   On Tuesday, the Financial Services Commission imposed the ban on short selling of all local stocks listed on the main KOSPI and the secondary tech-heavy KOSDAQ markets for three months. Short selling is the sale of shares by borrowing them in anticipation of price falls.

   The move came as foreigners' short selling quadrupled to around a daily average of 400 billion won (US$371 million), posing risks to the local market's stability.

   "If market uneasiness fades, there is no reason to block short selling. We will review lifting the ban earlier than expected if the market stabilizes," said Kwon Hyouk-se, the head of the Financial Supervisory Service (FSS), in a meeting with heads of foreign financial firms.

   The FSS chief said the ban was an inevitable measure to counter the recent financial storm and requested participants' full support.

   Kwon, meanwhile, asked the participants to convey accurate information about the local financial market amid rising investor panic, referring to their market reports.

   "Given the local economy's fundamentals, the impact of external uncertainties is likely to be limited on the South Korean economy," the FSS chief said, citing the country's heightened risk management capacity and strong export competitiveness.

Source: Yonhap News (August 12, 2011)