Financial stocks rise since shorting ban
More than two-thirds of the financial stocks in which UK regulators banned short-selling a fortnight ago have risen since the rule changes, beating the overall performance of major stock markets over the same period.
Figures compiled by Financial News show that from the close of trading on September 18 – the last day before new rules came into force ordering disclosure of existing short positions and outlawing fresh shorting – shares in 24 of the 34 financial companies included on the list had risen by yesterday’s market close, while 10 have fallen.
A hedge fund source today said the rise in the majority of financial stocks since the shorting ban is largely a result of short positions in those stocks being unwound since the ban came into force.
Leading the risers was F&C Asset Management, whose shares have climbed 17.7%, while Tawa, which manages run-offs of non-life insurance companies, dropped the most of the 10 stocks that have declined in the past fortnight, falling 17.9%.
The rises in the majority of financial stocks comes against a backdrop of broader declines in world stock markets over the past fortnight. The UK’s blue-chip FTSE 100 index has slipped 0.2% over the period to 4870.34 by the close yesterday, while in the US the Dow Jones Industrial Average index was nearly 5% lower at 10482.8.
The ban on short-selling drew widespread criticism from buy-side bodies that claimed it did not address the root of the problem.
Andrew Baker, chief executive of hedge fund body the Alternative Investment Management Association, said a fortnight ago that banning hedge funds from shorting stocks was “picking on the wrong targets and they’re easy targets”.
The Investment Management Association said short-selling was “neither the sole nor the principal reason” for the falls in bank shares in the weeks leading up to the ban.
--write to vahuja@efinancialnews.com
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