The proportion of stock short selling in South Korea accounted for 3.4 percent of total transactions in the first week of the practice's conditional resumption last week, down from 5.5 percent when the trading technique was banned last year, the bourse operator said Sunday.

The combined amount of short selling transactions stood at 3.3 trillion won ($2.9 billion), an average of 841.3 billion won per day during the four-session week and 3.4 percent of the total daily transactions, according to the data from the Korea Exchange (KRX).

The local bourse was closed Wednesday for Children's Day.

The proportion of short selling represented a sharp drop from the 5.5 percent on March 13, 2020, a day before the government suspended the practice, and from 4.5 percent, the daily average in 2019, according to the KRX.

Short selling is a trading strategy in which investors sell stocks they borrowed on the belief that the share prices will fall in the near future. When the prices decline, they can buy back the stocks at lower prices, pocket the profit and return the shares to the original owner.

The stock markets had mixed results last week, with the Kospi 200 advancing about 1.5 percent and the Kosdaq 150 retreating 1.3 percent. Short selling targets were dispersed in various sectors, including in biotechnology, gaming and electronic parts.

Institutional shorting dropped sharply to 10 percent of the total, or 87.5 billion won, from 39 percent, the average short selling proportation during the week before the ban was enforced in March last year.

"Short selling by institutions decreased due to regulations on market makers in stocks and futures trading, such as banning them from short selling on the mini Kospi 200," the KRX said in a statement.

The ban and resumption of stock short selling has been a bone of contention in Asia's fourth-largest economy. Retail investors have urged financial authorities to prohibit the hedging practice, calling it an unfair game for individual investors.

The country's financial authorities lifted the short selling ban Monday first on 200 market heavyweights on the main bourse and on 150 companies on the tech-laden Kosdaq market.

The lifting came almost 14 months after the authorities banned the trading practice over a stock market rout triggered by the COVID-19 pandemic. Regulators pushed back the lifting two times, testing the waters amid the spreading virus in South Korea. 

"The market uncertainties from the resumed short selling is limited and in fact, declining," the KRX said. (Yonhap)