Eun Sung-soo: "Short Selling Resumes in May... Not a Political Decision"

[Image source=Yonhap News]

[Asia Economy Reporter Park Jihwan] Eun Sung-soo, Chairman of the Financial Services Commission, stated on the 17th that the decision to partially resume short selling in May is not a political judgment.

On the same day, during a business report at the National Assembly's Political Affairs Committee, Eun responded to a question from Yoo Ui-dong, a member of the People Power Party, asking, "Isn't the decision to resume short selling a political judgment pushed by public opinion and political pressure?"

Eun said, "It can be thought of as a political judgment," adding, "There was an opinion suggesting to adopt the Hong Kong style, and considering the market shock, we decided on a partial resumption. I mentioned at the time of the announcement that such suspicions could arise."

Regarding the criticism that short selling is the cause of stock price declines, he emphasized, "Short selling involves selling stocks and then buying them back, so if a large volume is sold at the selling point, it can be a factor in price decline at that time. However, theoretically, short selling can be a factor in stock price decline, but it is not the main cause of the decline."

Concerns were also raised about the Financial Services Commission's proposed improvements to the short selling system. Currently, the credit loan and individual securities lending scale is limited to within 100% of securities firms' own capital, raising worries that expanding individual credit securities lending may be practically difficult.

In response, Chairman Eun said, "Credit loans have already reached 100%, so we have been considering how to increase individual credit securities lending. However, credit loans are risky when stock prices fall, leading securities firms to forcibly sell, while short selling carries risk when stock prices rise, so from the securities firms' perspective, these two risks can offset each other." He added, "We plan to approach individual credit securities lending by setting the risk ratio not at 100%, but at 50%, among other measures."

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