(Bloomberg) -- South Korea’s prime minister told listeners in a radio interview on Thursday that he isn’t a fan of short selling, weighing in on a controversial issue as the country moves to remove a pandemic-issued ban on the trading strategy.
“In my personal opinion, I think short selling is not a good policy,” Prime Minister Chung Sye-kyun said when asked about his views on plans by the government to allow a prohibition on the sale of borrowed stocks to expire in March. “I think short selling itself is undesirable.”
He added that his views were not official government views.
On Monday, South Korea’s stock regulator announced that it will lift the ban on short selling on March 16, about one year after it was imposed to calm the coronavirus-related selloff. The restoration, sure to be welcomed by hedge funds and other institutional investors, could leave Indonesia as the last major economy to maintain such a prohibition. Malaysia and six European nations had also banned short selling temporarily.
The rare public statement by the country’s most senior executive on short selling comes as the retail investors that now dominate Korea’s stock market volumes increase demands to permanently abolish the practice. Many of the country’s individual investors see short selling as favoring large institutional players as well as spurring market declines. Proponents say it results in a more liquid, efficient market and alerts investors to problems at targeted firms.
Among the thousands of anti-short selling petitions posted by retail investors on the presidential office’s website in recent months was an anonymous comment that drew 115,000 signatures from Korean citizens saying the government will “face a backlash from the public it can’t imagine” if the strategy is revived.
South Korea is set to hold two important by-elections in April, one to fill the role of mayor for Seoul and the other for the city of Busan. Victory for pro-Democratic Party officials in those ballots would be seen as confirmation of public approval for President Moon Jae-in heading into the 2022 presidential election. Moon appointed Chung as prime minister in December 2019.
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