Korea steps back from resumption of short-selling

Financial Services Commission (FSC) Chairman Eun Sung-soo speaks during a press conference at the Government Complex in Seoul, Monday. / Courtesy of FSC

By Park Jae-hyuk

The Financial Services Commission (FSC) appears to be taking a step back from lifting its temporary ban on short-selling on the Seoul bourse in March, after facing sharp criticism from ruling party lawmakers and retail investors over the issue.

FSC Chairman Eun Sung-soo said earlier this week that neither he nor any government official can confirm the resumption of short-selling, an investment method involving betting on a market downturn, which has been temporarily banned here since the increased spread of the coronavirus last March.

“Decisions on short-selling have been made at a meeting of the nine FSC commissioners,” Eun told reporters on the sidelines of a press conference on the commission's plan for this year. “I hope investors will wait a little longer until a final decision comes out.”

The financial regulator was earlier believed to be pursuing the lifting of the short-selling ban because it had texted reporters last Monday that the temporary measure would end March 15. The text message was sent immediately after a local news outlet cited a high-ranking FSC official in an article reporting that nothing had been decided regarding the resumption of short-selling.

“With the aim of resuming short-selling in March, the financial authorities plan to finish regulatory reform,” the FSC wrote in the text message.

Short-selling refers to a method in which an investor sells borrowed shares in the belief that the price will fall and they will be able to buy the shares back at a discount, keeping the difference and returning the borrowed shares.

After some ruling party lawmakers called for an additional extension of the short-selling ban in an apparent effort to win popularity with voters ahead of the April 7 by-elections, the financial regulator sent another text message to reporters the following day, reiterating its formal stance, which remained unchanged.

However, Prime Minister Chung Sye-kyun indicated his skepticism about short-selling on an appearance on a radio program last Thursday. Rep. Park Yong-jin of the ruling Democratic Party of Korea also wrote on Facebook that the FSC was ignoring the prime minister.

In response to the controversy, the FSC chairman said he may listen to lawmakers when the regular session of the National Assembly begins next month, although he added that financial authorities have yet to discuss the matter with the ruling party.