South Korean politicians are pressuring financial regulators to extend a ban on short selling in a bid to win the votes of retail investors, who have piled into markets ahead of important by-elections in April.
The prolonged ban on short selling, which has forced some hedge funds and institutions to divest from South Korean companies, is expected to be extended for at least another three months from mid-March, when the year-long embargo expires, according to investors and analysts.
In Seoul, what started as a question of market stability has become a political issue. More than 200,000 people have signed a petition on the presidential Blue House website demanding a permanent ban on short selling.
“It will be difficult to resume short selling just a month before the mayoral elections as the issue has become too politicised now,” said Hwang Seiwoon, a researcher at Korea Capital Markets Institute. “Most individual investors have a deep-rooted distrust of short selling.”
The…