The Kospi index fell 3% on Monday after a 17-month ban on short selling was lifted, coinciding with growing investor concerns over potential new U.S. tariffs.

Stocks tied to the electric vehicle supply chain were hit the hardest, having previously been common targets for short sellers. The Kosdaq index, which includes many such firms, erased its year-to-date gains.

With the ban lifted, investors can once again short-sell shares of all companies listed on Seoul’s stock exchange. However, naked short selling remains prohibited. A new monitoring system launched Monday, with 21 major institutions — including JPMorgan and Goldman Sachs — already connected.

Despite short-term volatility, analysts view the move as a positive step toward improving liquidity and transparency in the Korean market. Foreign funds sold around 1.8 trillion won ($1.2 billion) in Kospi and Kosdaq stocks in just one day.