Kim Joo-hyun, Financial Services Commission Chairman, "Short Selling Is Not the Decisive Reason for MSCI Inclusion Failure"

"Illegal Naked Short Selling Must Be Properly Corrected"

Kim Ju-hyun, Chairman of the Financial Services Commission, said on the 6th that concerns and criticisms that the ban on short selling could hinder inclusion in the Morgan Stanley Capital International (MSCI) Developed Markets Index are "not decisive."

Chairman Kim made this remark during the plenary session of the National Assembly's Special Committee on Budget and Accounts when Lee So-young, a member of the Democratic Party of Korea, asked, "If short selling is banned, wouldn't it be difficult to be included in the MSCI Developed Markets Index for the time being?"

Financial Services Commission Chairman Kim Ju-hyun is writing notes related to 'short selling' on a notepad during the plenary session of the Special Committee on Budget and Accounts held at the National Assembly on the 6th. [Image source=Yonhap News]

He stated, "(Inclusion in the MSCI Developed Markets Index) considers various factors, not just short selling alone. I don't think it's an issue where banning short selling means (inclusion) won't happen, and allowing it means (inclusion) will happen."

Chairman Kim emphasized the necessity of correcting illegal short selling as the background for the ban on short selling. He explained, "In a globally uncertain situation, major institutional investors' naked illegal short selling has been ongoing, and if it is not properly corrected, it could cause not only a loss of trust in the stock market but also significant problems in the fair price formation of the market, so a temporary ban was imposed." He also said, "We made institutional improvements and thought this would be sufficient, but recently, observing the behavior of various investment banks (IBs) and such, there are criticisms that this is not enough."

He emphasized, "During the temporary ban on short selling, we will proactively discuss with experts the issues raised by individual investors and others, and promote institutional improvements that the public can accept."

Regarding the Democratic Party's criticism that the ban on short selling was decided "overnight," Chairman Kim rebutted, "Such corrective measures cannot be announced in advance." In response to concerns that "the beneficial function of short selling in controlling stock price surges and manipulation will disappear," he said, "That is why the Financial Supervisory Service specially emphasized yesterday that during this period, they will strengthen crackdowns with the Korea Exchange on price manipulation and unfair trading, focusing on the possibility of such activities."