{"id":2202661,"date":"2023-11-07T08:00:53","date_gmt":"2023-11-06T23:00:53","guid":{"rendered":"https:\/\/koreapro.org\/?p=2202661"},"modified":"2023-11-06T19:04:29","modified_gmt":"2023-11-06T10:04:29","slug":"south-korea-suspends-short-selling-for-8-months-despite-economists-criticism","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/11\/south-korea-suspends-short-selling-for-8-months-despite-economists-criticism\/","title":{"rendered":"South Korea suspends short selling for 8 months despite economists\u2019 criticism"},"content":{"rendered":"<p>An 8-month suspension on stock short selling went into effect on Monday and will continue until next June. Financial Services Commission (FSC) announced the ban on <a href=\"https:\/\/en.yna.co.kr\/view\/AEN20231105002751320\">Sunday<\/a>, explaining that the move seeks to curb stock market volatility and ensure market stability and fair pricing. The decision follows the Financial Supervisory Service&#8217;s (FSS) <a href=\"https:\/\/www.businesskorea.co.kr\/news\/articleView.html?idxno=204779\">initiative<\/a> to investigate illegal short-selling activities among global investment banks dating back to May 2021. During a parliamentary audit last month, FSS Chief Lee Bok-yeon went so far as to <a href=\"https:\/\/stock.mk.co.kr\/news\/view\/255335\">suggest<\/a> that criminal penalties might be applied to both South Korean nationals and foreigners involved, in response public outrage over unlawful short-selling.<\/p>\n<p>Shortly after the FSC\u2019s announcement on Sunday, the ROK Presidential Office said that President Yoon Suk-yeol considers illegal short selling a grave social \u201c<a href=\"https:\/\/en.yna.co.kr\/view\/AEN20231105003200315?section=search\">malady<\/a>.\u201d The immediate <a href=\"https:\/\/finance.yahoo.com\/news\/south-korea-stocks-jump-nation-000548727.html\">impact<\/a> of the short-selling ban was evident when the market closed on Monday after the KOSPI soared by up to 5.7%, marking its most significant leap since March 2020 near the beginning of the pandemic. Short selling, the practice of selling borrowed stocks in hopes of profiting from a price decline, is typically seen as a means to align stock prices more closely with actual company value, thereby bolstering market confidence.<\/p>\n<p><strong>Why It Matters<\/strong><\/p>\n<p>The opposition Democratic Party has criticized the suspension as a \u201c<a href=\"https:\/\/www.yna.co.kr\/view\/AKR20231106072900001\">populist<\/a>\u201d policy aimed at garnering voter support ahead of the 2024 general election. The chief of the FSS, however, <a href=\"https:\/\/en.yna.co.kr\/view\/AEN20231106006200320?section=economy-finance\/economy\">defended<\/a> the government\u2019s temporary suspension of short-selling, saying that the measures are aimed to \u201clevel the playing field\u201d for retail investors. The ruling conservative People Power Party echoed this sentiment, emphasizing the policy\u2019s role in reassuring citizens alarmed by instances of illegal short-selling by global banks, including BNP Paribas and HSBC.<\/p>\n<p>However, not only <a href=\"https:\/\/m.khan.co.kr\/opinion\/editorial\/article\/202311052021001#c2b\">progressive<\/a> but also more <a href=\"https:\/\/m.segye.com\/view\/20231105512500?OutUrl=google\">centrist<\/a> <a href=\"https:\/\/m.kmib.co.kr\/view.asp?arcid=0924328683&amp;code=11171111\">and<\/a> <a href=\"https:\/\/www.mk.co.kr\/news\/editorial\/10866577\">conservative<\/a> analysts and newspapers described it as \u201c<a href=\"https:\/\/finance.yahoo.com\/news\/south-korea-stocks-jump-nation-000548727.html\">unusual<\/a>\u201d and <a href=\"https:\/\/www.mk.co.kr\/news\/editorial\/10866577\">risky<\/a> to ban short selling when there is no sign of a clear economic decline owing to major external risk. South Korea previously banned stock short selling only during major global crises like the 2008 subprime mortgage crisis, the 2011 European debt crisis and the pandemic in 2020, <a href=\"https:\/\/m.kmib.co.kr\/view.asp?arcid=0924328683&amp;code=11171111\">aiming<\/a> to prevent dramatic price fluctuations. A complete ban on short selling, even when temporary, also <a href=\"https:\/\/m.segye.com\/view\/20231105512500?OutUrl=google\">risks<\/a> eroding investor confidence in the Korean stock market and hastening the outflow of foreign capital. While small stock investors may welcome the ban, the move could also compromise the conservative credentials of the ruling party and Yoon administration, which have advocated for a free market and adherence to international financial protocols.<\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><a href=\"https:\/\/koreapro.org\/tag\/domestic-politics\/\"><span class=\"tag\">Domestic Politics<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>An 8-month suspension on stock short selling went into effect on Monday and will continue until next June. Financial Services Commission (FSC) announced the ban on Sunday, explaining that the move seeks to curb stock market volatility and ensure market stability and fair pricing. The decision follows the Financial Supervisory Service&#8217;s (FSS) initiative to investigate [&hellip;]<\/p>\n","protected":false},"author":5770,"featured_media":2202663,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24,27],"class_list":["post-2202661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy","tag-domestic-politics"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>South Korea suspends short selling for 8 months despite economists\u2019 criticism - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/11\/south-korea-suspends-short-selling-for-8-months-despite-economists-criticism\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Korea suspends short selling for 8 months despite economists\u2019 criticism - KOREA PRO\" \/>\n<meta property=\"og:description\" content=\"An 8-month suspension on stock short selling went into effect on Monday and will continue until next June. Financial Services Commission (FSC) announced the ban on Sunday, explaining that the move seeks to curb stock market volatility and ensure market stability and fair pricing. 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