Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
Korea tightens short-selling rules
Minister of Economy and Finance Hong Nam-ki, center, presides over a meeting at the Government Complex in Seoul, Tuesday. From left are Minister of Trade, Industry and Energy Sung Yun-mo, Hong and Financial Services Commission Chairman Eun Sung-soo. / Courtesy of Ministry of Economy and Finance
By Park Jae-hyuk
Investors call for authorities to take more radical steps
By Park Jae-hyuk
Minister of Economy and Finance Hong Nam-ki said Tuesday that the government has decided to temporarily allow the financial authorities to restrict the short selling of a wider range of stocks starting Wednesday.
The move is bid to stabilize the domestic financial market which has been hit by an overseas investors' selling spree amid fears that the COVID-19 outbreak is becoming a pandemic.
However, the introduction of the stricter measures against short selling has failed to reassure Korean retail investors who are calling for more drastic steps.
Short selling refers to the sale of borrowed shares in the hope of making a profit from a price fall when the shares are bought back at the lower price.
Under the previous rules, the authorities could impose a short selling ban for one trading day on “overheated short-selling stocks,” which refer to stocks that were sold short in abnormal amounts.
Over the next three months, the new regulations will ease the requirements for designating these and will allow the authorities to ban the shorting of such stocks for 10 trading days.
“We will swiftly and boldly take additional market stabilization measures if necessary,” Vice Finance Minister Kim Yong-beom said.
The measures came as calls have grown since the outbreak for the regulation of short selling.
According to the Korea Exchange, the volume of short selling on the KOSPI stood at a daily average of 642.8 billion won ($538 million) between March 2 and 9, double the volume of a year earlier.
Retail investors, however, were dissatisfied with the new measures, saying they were too weak to stabilize the market.
They demanded more radical solutions, such as a temporary ban on all short selling activities.
“We strongly denounce the government which is still complacent about the current situation,” the Citizens' Coalition for Economic Justice said in a statement. “If the stock market grows more unstable due to the financial authorities' inappropriate measures, we will demand they take responsibility.”
Rep. Kim Byung-wook of the ruling Democratic Party of Korea also opposed the government measures.
“The measures may be appropriate to prevent risks for certain stocks, but are insufficient for controlling market risks,” the lawmaker said. “The Financial Services Commission (FSC) should carry out a temporary complete short selling ban because anxiety about uncertainty has weighed on the entire market.”
The FSC, however, has remained cautious about stricter measures, saying this would go against “global standards.”
KOSPI bounces back
Against this backdrop, the benchmark KOSPI rebounded 0.42 percent to 1962.93, Tuesday, its first rise in the past three days.
The Korean won appreciated to 1193.2 won against the U.S. dollar from 1,204.2 won.
A day earlier, the Dow Jones Industrial Average sank more than 2,000 points ― the steepest decline since 2008 ― as fears have grown over the spread of the new coronavirus and an oil price war between Russia and Saudi Arabia.
European stocks also plunged Monday, closing at least 7 percent lower than the previous trading day.