Government Considering Extension of 'Short Selling Ban'?…Hong Nam-ki Says "Extension is Desirable"

[Asia Economy Reporter Koh Hyung-kwang] The possibility of extending the short-selling ban beyond the deadline of the 15th of next month has increased. Hong Nam-ki, the Deputy Prime Minister for Economy and Minister of Strategy and Finance, the government's economic chief, stated in an official setting that "it is desirable to extend the short-selling ban."

According to related industries on the 22nd, Deputy Prime Minister Hong said at the full meeting of the National Assembly's Planning and Finance Committee the previous afternoon, "Although inter-ministerial coordination has not been completed, considering the current economic situation, it is desirable to extend the short-selling ban." He also added, "(The short-selling ban expires) on September 15, so the government has only about a month left to set a policy, and we will coordinate within ministries," and "We will make a decision after gathering opinions from the Financial Services Commission and various ministries."

Short selling is an investment technique where stocks are borrowed and sold when a price decline is expected, and then repurchased at a lower price to return the stocks and gain a profit. The originally set short-selling ban period was six months, lasting until the 15th of next month.

However, as COVID-19 shows signs of re-spreading, opinions are sharply divided between those who argue that the short-selling ban should be extended further and those who believe that short-selling transactions should resume considering their positive functions. In particular, negative public opinion is growing among individual investors that "if short selling resumes, stock prices will plunge again," deepening the financial authorities' dilemma over whether to extend the short-selling ban.

Earlier, as the stock market plunged due to COVID-19, financial authorities announced a six-month short-selling ban on all listed stocks on the KOSPI, KOSDAQ, and KONEX markets from March 16 to September 15. The financial investment industry analyzes that this ban positively influenced the recovery of the domestic stock market.

This content was produced with the assistance of AI translation services.