South Korea has no plan to lift the short-selling ban until a system is developed to detect illegal trading activities, according to a senior official at the presidential office. 

The presidential office’s stance is to not resume short selling until there is a platform to root out naked short sales, the person said. Separately, the Financial Services Commission, the nation’s financial regulator, said no decision had been made regarding the ban.  

The comments suggest the restrictions, which the government initially imposed through the end of June, may extend beyond that as the system is at an early stage of development. South Korea unveiled details of the short-sale monitoring platform in April, which may take about a year to be established due to its complexity. 

“There have been indications they do intend to lift it in due course,” Timothy Moe, the chief Asia-Pacific equity strategist of Goldman Sachs Group Inc, said in an interview with Bloomberg TV on Thursday. “So I think the direction of travel is going to be in the right direction, although the timing of the event, as far as I am aware, is still somewhat uncertain.”

The government imposed the ban in November to eradicate what it then called “rampant” naked shorts - or the act of selling shares without borrowing them first. While retail traders welcomed the move, it has raised eyebrows within the professional investment community, as short selling is commonly used in other markets. 

Last week, Lee Bokhyun, the country’s top financial watchdog, told reporters in New York that his “personal desire and plan” is to see a partial resumption of the strategy next month. His remarks had fanned hopes that the trading strategy will soon be allowed. 

In April, President Yoon Suk Yeol said South Korea will maintain the restrictions until a centralised monitoring system is introduced.  

The system, to be managed by the Korea Exchange, will collect data on stock balances from 21 foreign institutions and 78 domestic firms, the government said last month. If there is a mismatch between a sell order and the outstanding balance, the transaction will be automatically reported to authorities.  

  - Bloomberg