(Dec 5): South Korea’s opposition leader Lee Jae-myung, one of the leading contenders to replace the sitting president after a brief martial law decree, is in favour of bringing back the practice of short selling in the nation’s US$1.6 trillion (RM7.13 trillion) stock market.

“We need the short-selling system,” Lee told Bloomberg TV in an interview on Thursday. “We need to allow it reasonably and fairly within the necessary boundary to make sure that it is not abused,” he said. “We need it for an MSCI inclusion.”

South Korea put a ban on all short-selling in November last year as the government sought to root out naked shorting — the practice of selling shares even without borrowing them first — which is illegal in the country. While the restrictions were due to expire at the end of June, authorities extended the deadline to March 2025 as they prepare a system to detect improper trades.

The regulator meanwhile has been scrutinising and investigating the activities of global investment banks for months and has imposed some penalties.

Short selling is a contentious political issue in South Korea, with its powerful retail investors often blaming it for stock declines and arguing that it gives unfair advantages to institutional investors.

On the other hand, the ban has dealt a setback to the nation’s attempts to win a market upgrade from MSCI Inc. In its annual classification review in June this year, the index provider decided to maintain South Korea’s status as an emerging market.

The short-selling ban “introduces market accessibility restrictions,” MSCI said in a statement back then.

Separately, Lee said it might be difficult to garner enough support from the ruling party to impeach President Yoon Suk Yeol this week over his declaration of martial law.

The benchmark Kospi Index fell 0.9% on Thursday to close at its lowest level since Nov 15 as the impeachment bill’s passage remains uncertain. It declined 1.4% on Wednesday.

Lee also vowed to implement a key legal change that investors are pushing for — the commercial code revision — within the current parliamentary session, aimed at improving corporate governance. 

He also expressed intent to resolve power supply issues through renewable energy to help semiconductor firms such as Samsung Electronics Co.  

The Kospi index is down about 8% this year and is among the world’s worst performers. “This could be an opportunity to dip buy,” Lee said. 

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