South Korea's Stock Market Plunges into Panic: Plans to Reimpose Short-Selling Ban and Reduce Price Limits to 30%

South Korea's stock market has recently undergone intense volatility, with regulatory authorities on high alert and accelerating evaluations of various market stabilization tools to balance reducing volatility risks, calming investor sentiment, and maintaining market openness.

According to multiple sources, including Yonhap InfoMax under the Yonhap News Agency, facing mounting pressure from retail investor losses, the Korea Exchange has recently conducted a technical review of emergency market mechanisms. This includes re-examining the feasibility of suspending short-selling activities and whether the current 30% price limit should be narrowed to curb extreme daily market fluctuations.

Sources emphasized that these internal assessments are routine checks of preventive measures for extreme market conditions, aimed at confirming the implementation conditions of various tools, and do not indicate that the government has decided to adopt such intervention measures.

In response to the rumors, the Korea Exchange publicly stated it has not received any instructions from the government regarding adjustments to the short-selling mechanism, nor has it conducted substantive research on such policies. It reiterated that major financial decisions cannot be made unilaterally by the exchange.

Meanwhile, South Korea's Ministry of Economy and Finance has held an emergency market situation assessment meeting, announcing the maintenance of the highest-level market alert and formally launching a cross-departmental 24-hour monitoring system to closely track market anomalies.

Currently, calls for a 'short-selling suspension' are growing louder in the market. On the National Petition Platform of South Korea's National Assembly, a petition demanding a ban on short-selling gathered over 10,000 investor signatures within just two days, reflecting retail investors' deep anxiety amid the market panic.

Political figures and securities analysts are also increasing pressure, with some lawmakers urging financial regulators to re-evaluate short-selling restrictions and consider restarting the securities market stabilization fund.

Securities analysts suggest that to achieve a sustained rebound at current levels, suspending short-selling could serve as a practical policy tool to alleviate panic-driven sell-offs and send a clear signal of market support.

However, the South Korean government faces immense decision-making pressure. Advancing Korea's stock market into the MSCI Developed Markets Index is a core government goal, but past experience shows that intervening in short-selling mechanisms directly affects foreign investors' assessment of market accessibility.

Previously, South Korea's implementation of a short-selling ban led to a downgrade in its market rating by MSCI, with improvements only seen after the mechanism was restored.

As market turmoil intensifies, balancing the suppression of market panic with the advancement of capital market upgrading has become the most challenging dilemma for South Korean regulators.