Pictet Mulls Long-Short Strategy as Korea Shorting Ban Nears End

As the short selling ban in South Korea nears its end, Pictet Asset Management is considering a long-short equity strategy to capitalize on the opportunities that the lifting of the ban may present. The Financial Services Commission (FSC) has announced that short selling will be fully resumed on March 31, 2025, after a temporary ban that was imposed in November 2023. This move is expected to have a significant impact on the flow of foreign capital into the Korean stock market and create new investment opportunities for Pictet's Lotus strategy.



The lifting of the short selling ban is seen as a crucial step towards enhancing the market's accessibility and attractiveness to foreign investors. Kim Byoung-hwan, the chief of the FSC, stated that "now is the time to consider more about foreign investors’ confidence (about our market)," indicating that the lifting of the ban is aimed at boosting foreign investors' confidence in the Korean market. The full resumption of short selling is also expected to help Korea's case for inclusion in MSCI's developed-markets index, which could significantly boost foreign capital inflows into the Korean stock market.

Pictet Asset Management's Lotus strategy, which focuses on identifying and capitalizing on corporate events and structural changes in Asia, can benefit from the lifting of the short selling ban in South Korea. The strategy's low correlation to equity indices, fixed income, and other hedge fund strategies means that it can offer diversification benefits to a range of portfolios. The lifting of the short selling ban will further enhance this diversification by providing access to a wider range of investment opportunities.

The strategy's market-neutral approach, which aims to generate alpha in both up and down markets, will allow the team to better manage risk and preserve capital through disciplined risk management. The lifting of the short selling ban will provide the team with more tools at their disposal to navigate market volatility and take advantage of new investment opportunities.

Pictet's Lotus strategy utilizes proprietary data models to build the portfolio, systematically screening the investment universe for opportunities and announcements. The lifting of the short selling ban will provide the team with additional data points and insights to inform their investment decisions and further enhance their approach to portfolio construction.

In conclusion, the lifting of the short selling ban in South Korea presents an opportunity for Pictet Asset Management's Lotus strategy to capitalize on the increased investment opportunities, diversification benefits, downside protection, and enhanced approach to portfolio construction that the resumption of short selling will provide. As the ban nears its end, Pictet is well-positioned to take advantage of the new investment landscape that the lifting of the ban will create.