S. Korea seeks to allow bond naked short-selling

SEOUL, Nov. 20 (Yonhap) -- South Korea's financial watchdog said Friday it is
moving to allow local and foreign banks to short-sell bonds, a step likely aimed
at attracting foreign bond buying.

South Korea has effectively restricted banks from so-called "naked short
selling," in which investors unload bonds they do not own anticipating price
falls, prodding them instead to beef up risk management.
"The watchdog plans to prepare guidelines for banks' bond short-selling after
discussing the matter with related authorities," Kim Jong-chang, governor at the
Financial Supervisory Service (FSS), said in a revised statement carrying his
speech at a forum.
The FSS said in its initial statement that it would allow short-selling by banks
in new guidelines, but later dropped the remarks.
Kim also said that the local bond market would grow further if foreign investors
were allowed more trading schemes.
According to the FSS, South Korea's outstanding bond issuance reached about 1,200
trillion won (US$1.04 trillion) as of the end of October with trading volume
likely to top 2,500 trillion won this year
As of end-October, foreign investors held about 55 trillion won worth of local
bonds, accounting for 5.5 percent of outstanding bond issuance, the FSS added.
sooyeon@yna.co.kr
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