S. Korea eyes chip alliance with Netherlands
Suneung without 'killer questions' still not easy, results show
US defense policy bill calls for maintaining 28,500 US troops in Korea
Teens' excessive smartphone use linked to mental health risk: study
SK carries out complete reshuffle of top brass
S. Korea, US, Japan to discuss regional security issues: White House
Ruling party reform committee disbands early, says job half done
Ex-justice minister's daughter attends forgery trial in college admissions scandal
Auditor says Moon govt distorted 2020 death of fisheries official
Moon officials tried to cover up North Korea’s murder of South Korean: state inspectors
Fear on Korean version of GameStop loomsBy Park Han-na
Published : Feb. 2, 2021 - 16:29
The Korea Stockholders Alliance, which represents around 22,000 retail investors, has launched a monthlong protest, threatening to wage an all-out war against short sellers, claiming that foreign and institutional investors benefit the most while small investors suffer from plunging shares. South Korea has around 7 million small share traders, they added.
If necessary, the alliance said, it will open a Korean version of “WallStreetBets” -- an online community that rallied users for an epic war against large Wall Street investors to drive up GameStop’s stock price.
“To prevent unfair stock trading, the ban on short selling should be extended to one (more) year in South Korea. A system sorting out naked short sales should be introduced before resuming the activities,” its statement read.
The action reflects a fear growing among amateur stock investors -- who have become a new powerful, yet immature force in the market -- over the plan of reactivating short selling trades.
Short selling is a strategy of borrowing, selling and repurchasing stocks to return to the lender, betting the share price will drop. The practice can be used to raise liquidity and boost stock prices in a sluggish market.
Expressing concerns over the possibility of retail investors taking a concerted action, Vice Finance Minister Kim Yong-beom vowed to keep an eye on the repercussions such collective action could incur.
“The situation surrounding some stocks such as GameStop in the US stock market last week is a representative example of how market volatility increases from collective actions taken by market participants,” Kim said during a macroeconomic and financial policy meeting held Tuesday.
GameStop’s stock price rose by as much as 1,700 percent in January as retail investors on the Reddit forum WallStreetBets joined forces to lift the video game retailer’s struggling stock in partial retaliation against hedge funds that had bet on the company’s fall. As a result, trading of the stock was halted several times in the last week due to volatility.
“In the digital transaction environment in which numerous market participants easily can access investment information on a real-time basis, such collective action can appear frequently,“ Kim said.
Such movement jitters the Financial Services Commission, the nation’s top financial regulator which has already made it official that it aims to lift the ban next month, as scheduled.
In an apparent attempt to fend off market concerns, the FSC reportedly asked 10 brokerage firms to add a stock lending feature to their respective system by June to expand retail investors’ access to short selling.
Along with the new system, a revision to the Capital Market Act that aimed to make punishment more stringent for those who engage in illegal naked short selling will come into effect on April 6.
Given that those measures will be implemented after March 15 -- the expiration of the ban -- market watchers say that the government may consider extending the restriction for at least another three months.
Political pressure from the ruling party to maintain the ban to tackle the discontent of voters ahead of the by-elections to take place on April 7 is another factor that could lead the FSC toward extending the ban.
By Park Han-na & Jie Ye-eun
4 contentious bills scrapped in revote after Yoon's veto
S. Korea logs current account surplus for 6th month in October
Ex-Democratic Party chair denies bribery, illegal campaign allegations