The Democratic Party is advancing legislation aimed at stabilizing the stock market, including a bill to prevent stock price manipulation and a mandatory public purchase system. The initiative seeks to improve the domestic capital market's structure by addressing corporate governance and protecting minority shareholders, moving beyond short-term stock price support. This effort comes in response to ongoing declines in the domestic stock market following the recent U.S. midterm elections, which resulted in what has been termed a 'blue tsunami.'
On November 10, the Democratic Party held a general meeting to discuss measures for stabilizing the stock market.
Kim Seong-hwa, the party's floor spokesperson, told reporters after the meeting, "We shared various opinions regarding the stock price manipulation prevention bill among the members. The mandatory public purchase system is also a bill agreed upon by both parties, and we will continue to consult with the opposition party on this matter."
Ogi Hyung, the ruling party's secretary of the National Assembly's Finance and Economy Committee, expressed his commitment to addressing the Korea discount before the meeting. He stated, "The biggest challenge is to consider how to overcome the phenomenon of low price-to-book ratios (PBR). A revision of the Capital Markets Act is currently pending in the National Assembly, which aims to ensure that boards of directors take a neutral stance during various acquisition processes."
He added, "The stock price manipulation prevention bill is one method. Many companies allow their stock prices to be set low during management and inheritance or gift processes, and we need to address these specific issues centered around the Capital Markets Act."
The stock price manipulation prevention bill discussed at the meeting aims to block the practice of major shareholders intentionally keeping company stock prices low to reduce inheritance and gift tax burdens. The Democratic Party expressed its determination to process this bill, believing it could encourage active shareholder returns and help escape the low PBR phenomenon.
The mandatory public purchase system would require major shareholders who acquire shares to transfer management rights to buy a certain percentage of shares held by minority shareholders at the same price and conditions. This is expected to address the issue of minority shareholders being excluded during mergers and acquisitions.
The Democratic Party's actions are interpreted as a response to the recent U.S. midterm election results, which have led to significant declines in the stock market. Although the KOSPI index recovered above 5,200 points on this day, concerns are growing over public sentiment as President Lee Jae-myung's pledge to maintain the KOSPI above 5,000 faces turbulence.
Prior to this, the domestic stock market had shown an overall downward trend following the U.S. midterm elections. According to the Korea Exchange, from November 2 to 6, 844 out of 2,659 listed companies on the KOSPI and KOSDAQ recorded their lowest prices of the year.
However, on this day, shares of Samsung Electronics and SK Hynix, the top two companies by market capitalization in the domestic stock market, rose, leading to a final increase of 220.28 points, closing at 5,239.13.
Meanwhile, on November 6, when the KOSPI index fell below 5,000, the Democratic Party held an emergency meeting with financial authorities to discuss follow-up measures. At that time, Kim stated, "The party will ensure that the government's market stabilization measures lead to tangible results that the public can feel. We will swiftly promote legislation and systems to create a capital market that is resilient to external shocks."
* This article has been translated by AI.
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