SEOUL – President Yoon Suk Yeol of South Korea announced that the existing ban on stock short selling will continue until financial authorities develop fundamental measures to safeguard retail investors from potential harm. This decision underscores the government's commitment to market fairness and investor protection.
According to Yonhap News Agency, Following the financial regulator's decision to prohibit short selling on the two main South Korean bourses from November 6, 2023, through June 2024, Yoon emphasized the importance of addressing illegal short selling practices that destabilize the market. He stated that illegal short selling practices could hinder fair price formation in the stock market and lead to significant losses for individual investors, ultimately eroding trust in the securities market and prompting investor withdrawal.
The ban on short selling comes in response to complaints from local retail investors, particularly concerning the impact on stocks linked to the electric vehicle supply chain. Despite concerns from some market observers about the regulation's potential impact on South Korea's bid to achieve developed market status from Morgan Stanley Capital International (MSCI) Inc., President Yoon believes the measure will enhance the competitiveness of South Korea's securities market in the long run due to the market's high volatility and the significant proportion of individual investors.
Yoon also called for financial regulators to develop solutions aimed at protecting retail investors, highlighting the government's focus on maintaining a fair and stable investment environment.