Shorting of financial sector stocks in France, Spain and Belgiumthree of the four European countries, with Italy excluded, that implemented a ban last week on the short selling of financial stocks in order to temper the marketswas below the individual overall market averages for equity short sales at the time of the ban, according to information supplied to Global Custodian by Data Explorers.
As of August 11, the average percentage of stock on loan of financial sector companies in Spain was 3.4% compared to 3.8% for all equities; in France, 1.0% compared to 3.1% overall; and 1.4% in Belgium compared to 2.4% overall.
The data also show overall equities on loan regularly exceed overall financial sector stocks on loan over time, and counter the widespread assumption that erratic short selling behavior among financial sector stocks caused the recent market volatility. The figures show there has been no unusual short selling activity in any of the markets recently or throughout all of 2011.
The trend would include Italy if not for one major outstanding loan for Banca Popolare di Milano, which has been in place since March and skews the numbers for Italy, Data Explorers says. Excluding that, the average shares of financial stocks on loan in Italy would fall to 1.4%, about the same as the market average for overall equities on loan. As of August 11, 2.4% of financial sector stocks were on loan compared to 1.2% for all equities.
Regulators in the four markets banned the shorting of financial stocks last week, suggesting short sellers plant negative rumors about companies to turn a fast profit, to the detriment of the shorted firms. Short sellers have been blamed for the dramatic decline in the stock values of companies such as Societe Generale, which unexpectedly dropped 15% at one point last week.
(CG)