Massive short selling has sent share prices of biopharmaceutical firm Samsung BioLogics Co. and defense contractor Hanwha Techwin Co. into a tailspin since their inclusion in the Morgan Stanley Capital International's Korea Index last week, sources said Tuesday.

The Geneva-based MSCI announced Thursday that Samsung BioLogics, a Samsung Group unit that makes generic drugs, and Hanwha Techwin newly made its Korea Index designed to measure the performance of the large- and mid-cap segments of the South Korean stock market.

According to the sources, Samsung BioLogics, which got listed on the main stock market on Nov. 10, and Hanwha Techwin have become the target of short sellers since the inclusion, which has sent their share prices tumbling.

Short selling of the two stocks hit their all-time highs last Wednesday, the eve of their inclusion in the MSCI Korea Index.

Investors short-sold a daily high of 458,000 shares of Samsung BioLogics on that day with the amount reaching 70.5 billion won ($60.4 million). About 868,000 shares of Hanwha Techwin worth 41.6 billion won were also short-sold.

Short selling is an investment technique in which an investor borrows shares and immediately sells them, anticipating that the price will drop so he or she can buy them back at a lower price.

Their share prices took a beating from the massive short selling. Samsung BioLogics closed at 142,000 won Monday, down 7.8 percent from last Wednesday. Over the cited period, Hanwha Techwin nose-dived 12.9 percent to 41,650 won.

Market watchers attributed the plunge in their share prices to the fact that investor expectations for the firms have run out following their inclusion in the MSCI Korea Index, adding the downturn has been exacerbated by short selling.

"In Samsung BioLogis' case, a price drop has been expected to some extent following the MSCI index inclusion," said an analyst on condition of anonymity. "Some watchers have also pointed out its initial public offering price of 136,000 won was considerably overvalued."

South Korea, meanwhile, has been ramping up efforts to put its stock market back on global index provider MSCI's review list of developed market index candidates, which could help lure more foreign investment. In mid-June, Seoul failed to make the list due to a lack of financial reforms required by MSCI. (Yonhap)