Yoon Targets Both Short Selling and Split Listings... But "Lacks 'Detail'"

Yoon Seok-yeol Candidate Announces Policy Targeting Individual Investors
Short Selling Management Policy Shows Few Differences from Existing System
New Share Subscription Rights Granted to Existing Shareholders in Split Listings... Contentious Issues Remain on Ratios

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Yoon Seok-yeol, the presidential candidate of the People Power Party, has announced capital market modernization pledges including the complete abolition of securities transaction tax, strengthening investor protection when companies list after physical division, and improvements to short selling. This is interpreted as an attempt to appeal to the rapidly increasing number of individual investors over the past two years. Although the pledges addressed various major concerns of individual investors, some responses noted a lack of detailed specifics.

On the 27th, Candidate Yoon announced these contents as part of his "Fair Recovery Pledge." First, he proposed abolishing the securities transaction tax. Previously, the government announced that from 2023, capital gains tax (CGT) of 20-25% would be imposed on annual capital gains exceeding 50 million KRW for all listed stocks, with a tax base of 300 million KRW, while the existing transaction tax would be gradually reduced from 0.25% to 0.15%. Investors opposed this, calling it double taxation. Seizing on this point, Yoon pledged to completely abolish the transaction tax and apply a lower preferential tax rate for long-term stock holdings.

He also stated that when a new business is split off and listed as a separate company, shareholders of the parent company would be granted preemptive rights to subscribe to new shares. This appears to be in response to growing investor dissatisfaction after the parent company’s stock price plunged following physical divisions and listings of subsidiaries such as LG Chem. As LG Chem’s subsidiary LG Energy Solution, specializing in secondary batteries, approached its listing, the premium for the secondary battery "blue-chip" disappeared, causing a sharp decline in LG Chem’s stock price. Early in the trading session that day, the price hit 616,000 KRW, marking a 52-week low.

Candidate Yoon said, "Recently, some companies’ decisions to split off core new businesses have caused stock prices to fall, leaving many investors disappointed. If gains arise from the listing of subsidiaries, it is relatively clear that original parent company shareholders suffer opportunity losses. Therefore, when subscribing to subsidiary IPOs, we will grant preemptive rights to original parent company shareholders to subscribe at a certain ratio at the offering price."

Regarding short selling, which has been a major source of investor dissatisfaction, Yoon only promised "reasonable improvements." He emphasized, "We plan to reasonably adjust the higher collateral requirements compared to institutions and actively consider introducing a 'short selling circuit breaker' that automatically bans short selling when stock price declines are excessive. We will improve the system so that individual investors are not disadvantaged compared to foreign and institutional investors in short selling."

Other pledges included ▲unlimited restrictions on insiders’ share sales ▲and revolutionary improvements in transparency and fairness of the capital market. However, some responses pointed out a lack of detail. Hwang Se-woon, senior researcher at the Capital Market Research Institute, said, "Addressing transaction tax abolition, physical division listings, and short selling was timely, and the abolition of transaction tax will be fully welcomed by investors. However, how much preemptive rights will be granted to parent company shareholders during physical division listings is a very sensitive issue, and we need to observe how the 'short selling circuit breaker' differs from existing short selling restrictions."

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