At a parliamentary financial committee meeting on Tuesday, Finance Minister Choo Kyung-ho declared his support for the ban on stock short selling, despite worries over the potential for foreign capital to leave and South Korea’s inability to earn a developed market status from Morgan Stanley Capital International (MSCI) Inc.
“I agree with the full ban, as of now,” Choo answered to Democratic Party representative Kim Tae-nyeon’s query about the ban possibly causing increased market uncertainty and a massive outflow of foreign capital.
“Though there are such concerns, some investors and legislators have expressed worries about short selling practice. Let’s see how the market responds and judges,” Choo continued.
Market observers have also suggested that the new regulation will make it more difficult for South Korea to be included in the MSCI indexes as a developed market. Choo responded, “It is true that short selling is one of the multiple issues that must be resolved for the MSCI upgrade. The government will keep reforming measures related to the MSCI status.”
The Democratic Party member asserted that the government “made an erroneous decision to attract voters before the general elections” in April 2024. Short selling involves selling borrowed shares to buy them back at a lower cost and obtain the difference.
graceoh@yna.co.kr
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