(Bloomberg) -- South Korea's benchmark stock index fell, paring its biggest jump in over three years following the nation's move to reimpose a full ban on short-selling.
The Kospi Index dropped as much as 1.8% in early trading. The gauge surged 5.7% Monday, its best performance since March 2020, helped by apparent short-covering after the market regulator said selling of borrowed shares would be completely prohibited through June 2024.
READ: Korea Slams Banks, Hedge Funds With Pre-Election Short Sale Ban
The small-cap Kosdaq Index briefly slid 1.7% before turning higher, extending the previous day's 7.3% jump.
Some heavily shorted electric-vehicle battery names including LG Energy Solution Ltd. that skyrocketed Monday fell back on Tuesday. Others including Ecopro BM Co. extended gains.
“We are seeing profit-taking in Kospi after a sharp rally in the previous session,” said Kim Jungyoon, a researcher at Daishin Securities Co. “Kosdaq is still seeing some short covering as some of the Kosdaq stocks that are rising are not gaining because of their fundamentals. They are battery-related stocks facing slowdown in EV demand and other negative news in the sector.”
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