South Korea’s extended short-selling ban poses risk to market liquidity



Analysis South Korea’s extended short-selling ban poses risk to market liquidity Institutional investors face further regulatory costs as Seoul struggles to implement its new monitoring system on time John LeeSeptember 27, 2024 SHARE COPY LINK FACEBOOK X LINKEDIN MASTODON Korea Exchange building, July 25, 2024 \| Image: Korea Pro South Korea’s financial watchdog announced on Friday that it would extend the country’s short-selling ban until March 31, 2025 to allow time for the implementation of a new system to detect illegal naked short selling. While the Financial Services Commission (FSC) framed this extension as necessary to protect retail investors and restore market stability, the decision introduces significant risks to South Korea’s financial market, threatening to spook foreign investors by increasing uncertainty and threatening to curtail short-selling activity. EXTENDED BAN The FSC initially imposedits short-selling ban in Nov. 2023 to address illegal naked short selling by institutional investors, with © Korea Risk Group. All rights reserved. No part of this content may be reproduced, distributed, or used for commercial purposes without prior written permission from Korea Risk Group. LATEST ANALYSIS 01Lee Jae Myung’s Wall Street pitch tests South Korea’s capital market credibility 02US midterm clock raises stakes for South Korea’s $200 billion investment talks 03Lee’s Hormuz red line tests South Korea’s leverage in $350 billion US talks 04South Korea’s AI data center boom is colliding with the true cost of power 05Why South Korea cannot rebalance growth without stronger regional clusters 06Samsung, SK Hynix rejection exposes South Korea’s chip-grid financing problem 07Trump’s Cheongung social media post tests Seoul’s refusal to arm to Ukraine 08Lee Jae Myung risks public trust as South Korea rewires its justice system

Analysis

South Korea’s extended short-selling ban poses risk to market liquidity

Institutional investors face further regulatory costs as Seoul struggles to implement its new monitoring system on time

John LeeSeptember 27, 2024

South Korea’s extended short-selling ban poses risk to market liquidity

Korea Exchange building, July 25, 2024 | Image: Korea Pro

South Korea’s financial watchdog announced on Friday that it would extend the country’s short-selling ban until March 31, 2025 to allow time for the implementation of a new system to detect illegal naked short selling.

While the Financial Services Commission (FSC) framed this extension as necessary to protect retail investors and restore market stability, the decision introduces significant risks to South Korea’s financial market, threatening to spook foreign investors by increasing uncertainty and threatening to curtail short-selling activity.

EXTENDED BAN

The FSC initially imposedits short-selling ban in Nov. 2023 to address illegal naked short selling by institutional investors, with

South Korea’s extended short-selling ban poses risk to market liquidity

LATEST ANALYSIS

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John Lee