London Stock Exchange says FTSE didn't send Korea warning

Attendees applaud at a ceremony at the Korea Exchange building in Seoul to celebrate the promotion of Korea to Developed Market status by FTSE Russell in this September 2009 file photo. / Yonhap

Global index provider remains silent about Seoul's short selling ban

By Park Jae-hyuk

London Stock Exchange Group (LSEG) has confirmed its wholly-owned subsidiary FTSE Russell did not send a warning letter to the Korean government over its decision to extend the year-long ban on short selling on the Seoul bourse for several more months.

“I've checked and there is no record of such a letter being sent by FTSE Russell to South Korea's Financial Services Commission (FSC) as you describe,” LSEG press officer Oliver Mann told The Korea Times via email. “We wanted to let you know this to ensure against inaccurate reporting.”

This is the first statement from the British stock exchange company denying local reports that the global index provider sent a letter to the FSC's capital markets bureau, Wednesday, to warn that Korea might be demoted from Developed Market status if it maintains the temporary restriction of short selling.

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, returning the borrowed shares and keeping the difference. The Korean government has temporarily banned the method since March last year to minimize the impact of the COVID-19 pandemic on the domestic stock market.

On Wednesday, FSC Chairman Eun Sung-soo announced that the government would extend the ban until May 2, 90 days beyond its scheduled expiration date of March 15. The controversial news report about the FTSE's warning was published a day after the announcement.

Though LSEG denied the reports of an official letter, some securities analysts here believe there still remains the possibility of Korea being delisted from the Developed Market index.

Korea was promoted to Developed Market status from Advanced Emerging status in September 2009, following the FTSE advisory group's approval in 2008. When managing promotions and demotions, the index provider takes into account several criteria, including permission of short sales.

“Global index providers such as MSCI and FTSE take into account the accessibility to short selling when assessing markets,” DB Financial Investment analyst Seol Tae-hyun said. “Turkey was warned of possible demotion in June last year, after it maintained a short selling ban for a long time.”

The LSEG spokesman did not answer whether or not FTSE is considering demoting Korea. He was also unavailable to provide comment on the index provider's view on Seoul's extension of the short-selling ban.