"Stock Market Cold Shower" "Essential for Bubble Removal"... Renewed Controversy Over Resuming Gongmaedo [Asset Bubble Warning]

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[Asia Economy Reporter Park Ji-hwan] The resumption of short selling, just over two months away, has emerged as a hot issue in the domestic stock market. There are conflicting views: some argue that it will pour cold water on the market that succeeded in breaking out of the box range (Boxpi, KOSPI + box range) sustained for 13 years since reaching the 2000 level in 2007, while others insist that resumption is essential to eliminate the rapidly overheated market bubble. As political circles continue to comment on short selling, there is also concern that the financial authorities’ policy direction could be swayed by political logic.

According to the financial investment industry on the 12th, a petition titled “Permanently Ban Short Selling” posted on the Blue House’s national petition board at the end of last year had garnered more than 80,000 supporters by the morning of that day. Short selling is an investment method where stocks are borrowed and sold when a price drop is expected, and then repurchased at a lower price to return the stocks and earn a profit. While it has the advantage of curbing overheated stock prices, there are also criticisms that it encourages stock price declines.

Individual investors believe that if short selling resumes, a stock price drop is inevitable, especially impacting KOSDAQ, where individual investor participation is high. Jeong Eui-jeong, head of the Korea Stock Investors Association, urged abolition, saying, “Boxpi has been maintained for 13 years, and if you investigate the profit rates of short selling entities during that period, you will immediately know whether short selling is necessary or should be eliminated.”

On the other hand, there are claims that banning short selling goes against global trends and that the function of maintaining “fair prices” is needed at this time. Hwang Se-woon, a research fellow at the Korea Capital Market Institute, argued, “An early resumption of short selling in January is urgent to reduce the stock market bubble in the short-term overheated phase.”

Political circles are also joining the short selling controversy one after another. Yang Hyang-ja, a Supreme Council member of the Democratic Party of Korea, emphasized at the party’s Supreme Council meeting the day before, “We should consider extending the ban on short selling so that the heated capital market can lead to the real economy.” Park Yong-jin, a lawmaker from the same party, also stated that the resumption of short selling should be postponed until a system that can firmly block unfair market practices is established.

As the controversy over short selling intensifies, financial authorities have emphasized their intention to resume short selling as scheduled in March. The Financial Services Commission announced the day before, “We plan to complete institutional improvements such as strengthening penalties for illegal short selling, improving the market maker system, and enhancing individual investors’ access to short selling, aiming to resume short selling in March.”

However, since demands for abolition or further extension of the short selling ban are strong not only among individual investors but also in political circles, a policy shift cannot be ruled out. Research fellow Hwang pointed out, “The short selling issue has become a political issue rather than a financial one,” adding, “There is concern that the conclusion will be reached based on political logic rather than economic rationale.”

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