Permanent Ban on Short Selling Reaches Blue House Petition... What Lies Ahead for Retail Investors?

Blue House National Petition Surpasses 200,000 Signatures... Authorities' Decision in Focus
IMF "Korean Stock Market Stability, Short Selling Resumption Possible"

On the 29th, the KOSPI index is displayed on the electronic board in the dealing room of Hana Bank in Euljiro, Seoul. On this day, the KOSPI started at 3,078.73, up 9.68 points (0.32%) from the previous trading day, showing an upward trend. Photo by Moon Honam munonam@

[Asia Economy Reporter Jang Sehee] As the domestic stock market is booming, with the KOSPI index surpassing the 3000 mark for the first time in history, the extension of the short-selling ban has become a hot issue.

According to the Blue House's public petition board on the 30th, the petition titled "We petition for a permanent ban on short selling. Is there a problem with the stock market without short selling?" has surpassed 200,000 participants. Having already met the response criteria, attention is now focused on the Blue House's stance.

The petitioner stated, "Now that short selling is banned, is there even a single problem in the stock market?" and added, "Money flows into companies that still have investment value and flows out of companies that do not. There is not a single problem with how the stock market operates."

They continued, "If short selling is reinstated, this government and the Democratic Party will face an unimaginable backlash greater than any policy they have implemented and will be judged by the people," urging, "Stop sacrificing the people for foreigners and institutions."

However, Andreas Bauer, the International Monetary Fund (IMF) mission chief, supported the government's move to resume short selling during the '2021 IMF Annual Consultation Results Briefing' held via video conference on the 28th.

Bauer said, "Since the Korean financial market has stabilized significantly after COVID-19 and the economy is recovering, I believe resuming short selling is possible."

He added, "A complete ban on short selling to secure an equal market is considered a blunt response," and "It could entail very high costs in terms of market efficiency." This means that when stock prices fall, downward pressure increases, potentially heightening market instability.

The Korea Capital Market Institute also stated at this year's Capital Market Outlook and Key Issues Seminar that while concerns about market shocks due to allowing short selling are growing, based on similar overseas cases, the market impact is expected to be limited.

Meanwhile, financial authorities had planned to resume short selling in March but are taking a cautious stance amid strong protests from individual investors.

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