[Reporter’s Notebook] Full Resumption of Short Selling, Weighing It Until After Next Year’s Presidential Election?

[Asia Economy Reporter Ji Yeon-jin] "The full resumption of short selling is something that must be done eventually."

This statement was made by Ko Seung-beom, Chairman of the Financial Services Commission, immediately after the first meeting with the capital market industry on the 30th of last month. He said that the timing for the full resumption would be decided after comprehensively reviewing the effects of the partial resumption of short selling, market conditions, COVID-19, and the macroeconomic situation. This is a fundamental response, similar to what he stated at the National Assembly confirmation hearing a month ago.

At the meeting, securities firms and asset management companies suggested that expanding access to short selling for individual investors and considering market conditions after the resumption of short selling necessitate an expansion of short selling. In fact, on May 3rd, the first day of the partial resumption targeting large-cap stocks such as KOSPI 200 and KOSDAQ 150, the short selling transaction amount reached 1 trillion won, but it has since decreased, recording an average daily amount of 600 billion won this month. Considering the recent significant increase in stock market transaction volume, the Financial Services Commission's analysis is that the proportion of short selling relative to total transaction volume is about half of what it was before.

The Financial Services Commission also evaluated that the stock prices of the top short selling stocks actually rose, indicating a limited impact. This year, South Korea's economic situation is showing a rapid recovery, and with the expansion of COVID-19 vaccinations, the country is approaching a transition to a "with COVID" phase. However, regarding the timing of the full resumption of short selling, they only said, "It is something that must be done eventually," avoiding a direct answer.

In the financial investment industry, the prevailing view is that short selling will not be fully resumed before the presidential election in May next year. This is because individual investors oppose short selling, viewing it as a "tilted playing field." Due to last year's stock investment boom, individual investors have grown so powerful that the new term "Donghak Ant" was coined, and they have been winning battles over major capital market policies. The partial resumption of short selling was a last-ditch effort to minimize opposition from both the industry and individual investors ahead of the Seoul mayoral by-election in April. Individual investors demand a transparent system where short selling forces cannot gain a foothold. Leaving the establishment of a trustworthy system to industry self-regulation and expanding short selling opportunities for individual investors will not resolve the tilted playing field issue.

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