President Yoon Suk Yeol speaks during a Cabinet meeting at the presidential office in Seoul on Nov. 14, 2023. (Image courtesy of Yonhap)
SEOUL, Nov. 14 (Korea Bizwire) — President Yoon Suk Yeol said Tuesday the current ban on stock short selling will remain in effect until financial authorities devise measures to fundamentally prevent potential damage to retail investors.
Yoon made the remarks during a Cabinet meeting, following the financial regulator’s decision to prohibit short selling in stocks on the two main bourses from Nov. 6 through the end of June 2024, citing illegal short selling practices adversely affecting market stability.
“Allowing the issue of illegal short selling could not only make it difficult to achieve fair price formation in the stock market but also result in significant losses for individual investors, resulting in a decline in trust in the securities market and the departure of investors,” Yoon said.
The regulator’s latest move followed repeated complaints by the legions of local retail investors who expressed dissatisfaction with the impact of short selling, particularly on stocks linked to the electric vehicle supply chain.
Some market observers, however, are expressing concerns about the latest regulation complicating the country’s bid to gain developed market status from Morgan Stanley Capital International (MSCI) Inc.
The MSCI reclassifies its watch list of emerging markets and developed markets based on the countries’ economic development and size and liquidity of equity markets, as well as market accessibility for foreign investors. This year, South Korea failed to win developed market status and has stayed on the emerging market list though it proposed a set of reform measures.
Despite such concerns, Yoon said, “as our stock market has high volatility and the proportion of individual investors is significant, I believe (the measure) will positively influence our competitiveness in the securities market in the long term.”
Yoon also called for financial regulators to devise solutions to protect retail investors.
(Yonhap)
