Reiterating the Reasons for Short Selling Ban at Foreign Press Conference
Kim So-young, Vice Chairman of the Financial Services Commission, stated on the 1st that the temporary ban on short selling was implemented to prevent further damage by establishing fundamental improvement measures.
In her opening remarks at a press briefing with foreign journalists held at the Korea Press Center in Jung-gu, Seoul, Kim said, "Allowing rampant illegal short selling makes it difficult to form fair prices in the stock market, and given the high proportion of individual investors in our stock market, this is very likely to lead to significant damage to individual investors and a decline in trust in the securities market."
This event was organized for Vice Chairman Kim to explain the current government's capital market policies to foreign journalists. As concerns about the full ban on short selling continued overseas, it is interpreted that Vice Chairman Kim provided additional explanations regarding the reasons for the short selling ban.
Earlier, the Financial Services Commission held an emergency meeting on the weekend of November 5 and decided to ban short selling for about eight months (from November 6, 2023, to June 28, 2024). Since the COVID-19 pandemic, short selling had only been allowed for KOSPI 200 and KOSDAQ 150 stocks. Despite no crisis situation in the domestic stock market recently, the temporary full ban on short selling caused the stock market to surge on the first day and then plunge the next day, resulting in increased market volatility and heavy criticism. There were even suspicions that the current government pushed the short selling ban policy excessively as part of its general election strategy.
Vice Chairman Kim emphasized, "The government has continuously taken strict measures against illegal short selling to create a trustworthy stock market, but the Financial Supervisory Service's investigation found that some investors have habitually engaged in large-scale naked short selling. Rampant illegal naked short selling undermines the fair price formation of the stock market and is a serious issue that can sharply reduce trust in the Korean stock market."
She added, "The government will promote progressive institutional improvements together with market experts and related organizations so that our capital market can operate more efficiently." She continued, "In this process, we will also listen carefully to the constructive advice from overseas investors and the market conveyed by foreign journalists."
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