October 1st is a public holiday in Hong Kong, Singapore, Malaysia, Indonesia and the Philippines. While China financial markets are closed all week for the National Day celebrations, Muslims worldwide are celebrating with Eid al-Fitr festivities marking the end of the Ramadan fasting month.

Bloomberg – South Korea, Taiwan and Indonesia have placed bans on short-selling as declines in global stock markets deepened after the US House of Representatives rejected a US$700 billion plan to rescue the nation’s financial system.

Regulators in Seoul said they would temporarily ban short-selling on all stocks to arrest a 24 per cent slump in the nation’s stock market this year. Indonesia’s stock exchange banned short-selling for the month of October, citing unstable market conditions.

Taiwan, which on Sept 21 barred the short-selling of 150 stocks for two weeks until Oct 3, said it would tighten limits on short-selling for the remainder of the year. It did not say if the ban would end on Oct 3 or be extended.

The measures by the Asian regulators came after US stocks plunged on Monday, with the Standard & Poor’s 500 Index tumbling the most since the 1987 crash. Regulators in the US, UK and Australia have taken similar measures on short-selling.

‘There is no reason why our market has to be in a panic because of the US situation,’ Lim Seung-tae, secretary-general of South Korea’s Financial Services Commission, told reporters in Seoul yesterday. He did not say how long the ban, which takes effect on sales starting today, will last.

South Korea’s Kospi index fell 0.6 per cent yesterday while Taiwan’s Taiex index lost 3.6 per cent. The Taiex has fallen 33 per cent this year. The Indonesian stock market was closed for a holiday from yesterday until Friday. The benchmark Jakarta Composite Index is down about a third this year.

South Korea, where ‘naked’ short sales, in which traders don’t borrow the shares, are already banned, said last week it would increase oversight of short- selling and make it harder for investors to borrow stocks. It will also loosen, until the end of this year, the daily limit on companies buying back their shares, allowing them to buy 10 times more stock, Mr Lim said.

Hong Kong said it would take ‘more aggressive’ action against so-called abusive short-sellers while the Philippine Stock Exchange approved a circuit breaker rule for a 15-minute trading halt if the benchmark index drops 10 per cent from the previous day’s close.

Short-sellers try to profit by betting stock prices will fall. In a short sale, traders borrow shares from their broker that they then sell. If the price drops, they buy back the stock, return it to their broker and pocket the difference.

Taiwan’s Financial Supervisory Commission said on Monday night that the amount of borrowed shares that can be traded each day will be limited to 10 per cent of a company’s listed stock, from 25 per cent. Source – Bloomberg