Ruling Party's Push for 'Short Selling Ban'... Aiming to Win Donghak Ants' Votes Before the General Election?

Ruling Party Strongly Requests 'Short Selling Ban'
Interpreted as 'General Election Strategy'
Ruling Party Emphasizes 'Resolving Market Disruption'

The ruling party has pulled out the card of banning short selling following the proposal to incorporate Gimpo City into Seoul. This is interpreted as an election strategy aimed at targeting retail investors about five months ahead of the general election. The leadership of the People Power Party is cautious about overinterpreting the government's ban on short selling, stating that it is a measure to correct the capital market order rather than an election strategy.

On the same day, Yoon Jae-ok, the floor leader of the People Power Party, held a Supreme Council meeting at the National Assembly and said, "There has been a very high level of dissatisfaction among 14 million retail investors regarding short selling," adding, "This measure is an extraordinary step to prevent market manipulation through short selling, illegal short selling under the Commercial Act, and the rampage of forces plundering honest retail investors, and to ensure fair price formation."

Regarding concerns about the side effects of banning short selling, Yoon said, "If market manipulation through short selling and illegal short selling continue unchecked, leading to unfair competition, trust in the market will collapse, and investors will withdraw, causing even more serious concerns."

Kim Ki-hyun, the leader of the People Power Party, is speaking at the Supreme Council meeting held at the National Assembly on the 6th. Photo by Kim Hyun-min kimhyun81@

The People Power Party also changed the backdrop in the meeting room that day to "Policies by the residents, for the residents, and of the residents." This was to emphasize that the proposal to incorporate the Gyeonggi area, including Gimpo, which shares a living sphere with Seoul, into Seoul, as well as the push to ban short selling, are policies "for the residents," not just moves to win votes.

Earlier, the Financial Services Commission held an extraordinary meeting the day before and announced that short selling would be completely banned for eight months from that day until the end of June next year. The government and ruling party also discussed measures related to short selling at a closed-door high-level party-government meeting the day before. It is known that the ruling party's strong demand played a role in this ban on short selling. At the meeting, Yoo Ui-dong, the chairman of the Policy Committee, explained, "The People Power Party has strongly requested the government to improve the short selling system, and the financial authorities responded by deciding to completely ban short selling until the first half of next year, during which they will prepare system improvements and conduct a full investigation of global investment banks."

In political circles, this measure is seen as a strategy to restore lost support ahead of the general election. Since individual investors, including those in their 20s and 30s who entered stock investment during the COVID-19 pandemic, had significant complaints that short selling was disadvantageous, it is believed that banning short selling could regain their support. On the 15th of last month, a national petition advocating for improvements to the short selling system gathered over 50,000 signatures and was referred to the National Assembly's Committee on Economy and Finance. On the same day, Lee So-young, a Democratic Party lawmaker, criticized the ban on short selling and the incorporation of Gimpo into Seoul on CBS Radio, saying, "I see these two policies as both procedurally very hasty and as populist policies prepared and planned for short-term political gains."

However, the People Power Party drew a line against such criticism. After the meeting, senior spokesperson Park Jeong-ha told reporters in response to related questions, "I find it difficult to agree with some criticisms that there was a series of processes and that it was hastily put together," adding, "Because the ban on short selling has strong explosive power, I expect that institutional supplements will be made during the ban period by the Financial Services Commission."

Earlier, voices advocating for a ban on short selling had also been pouring out within the People Power Party. On the 1st, lawmaker Kwon Seong-dong mentioned the detection of illegal short selling by global investment banks on Facebook, writing, "Responsible measures that can alleviate the anxiety of retail investors are urgently needed."