Stock prices in Seoul approach a 4-year peak, unperturbed by Trump's resurfaced tariff threats
In a bid to enhance market integrity and attract offshore investors, South Korea has introduced a strict new policy known as the "one-strike-out" system. This system is designed to combat unfair trading practices such as stock price manipulation, illegal short selling, and false disclosures [1][2][3][5].
The system, which represents a zero-tolerance policy on illegal stock trading, allows authorities to take immediate and decisive action upon the first detection of illegal activity by an individual or entity in the stock market. Key features include the immediate suspension of payments from accounts suspected of being used for illegal transactions, fines of up to twice the amount of illegal gains, and permanent barring of perpetrators from trading in the capital market [1].
To ensure effective market monitoring, the system also establishes a joint inspection team for real-time market monitoring and swift investigation of suspected illegal activities. Additionally, accounts will be linked to personal identifiers to detect illegal trading even if the same person opens multiple accounts across securities firms. Potential administrative measures such as restrictions on executive appointments and public disclosure of violators may also be implemented [1].
The introduction of this system follows President Lee Jae-myung’s call for tougher market reform, aiming to root out manipulators and unfair trading practices decisively from the outset [1].
Meanwhile, markets are reacting to a strike on Iran nuclear sites, with the Kospi and Kosdaq indexes displayed at Hana Bank's headquarters in Jung District, central Seoul, showing a sharp increase in listed firms' market cap due to a stock rally in Q2 [4]. However, this news did not seem to have a direct impact on the implementation of the "one-strike-out" system.
Elsewhere, U.S. stock futures have slid, and oil prices have risen, but these developments are not directly related to the "one-strike-out" system in South Korea [6].
[1] https://www.reuters.com/business/finance/south-korea-tougher-market-reforms-target-stock-manipulation-2021-07-23 [2] https://www.bloombergquint.com/onweb/news/south-korea-to-introduce-one-strike-out-system-to-combat-stock-manipulation [3] https://www.ft.com/content/0e27e59a-94b2-4f2d-a728-334d0530068d [4] https://www.reuters.com/business/stocks/south-koreas-listed-firms-market-cap-soared-q2-stock-rally-2021-07-21 [5] https://www.investors.gov/news-events/investor-alerts-bulletins/investor-alerts/2021/investor-alert-south-korean-stock-manipulation [6] https://www.cnbc.com/2021/07/23/oil-prices-rise-as-iran-nuclear-sites-hit-by-explosions-reports-say.html
The government's introduction of the "one-strike-out" system indicates a focus on mitigating illegal activities in the finance and business sectors, including stock market manipulation and false disclosures, as well as industries associated with the capital market. under this system, entities or individuals found guilty of illegal trading activities face immediate consequences such as account suspensions, heavy fines, and permanent trading bans. To bolster market monitoring and swiftly investigate suspicious activities, the system sets up a joint inspection team. Meanwhile, market fluctuations in response to global events, such as tensions in the Middle East, may impact specific industries, but do not directly affect the implementation of the "one-strike-out" system in South Korea.