Short-selling ban ‘red herring’ for wider euro-zone problems – ATP
EUROPE - Following widespread criticism from fund managers of Germany's short selling ban, Danish pensions giant ATP has questioned whether the ban was to blame for the subsequent currency and stock market falls.
Asset managers have complained that the German government's decision on Tuesday to ban naked short selling of the country's financial stocks was little more than a political gesture and which only served to increase uncertainty in the markets and spook investors.
But Christian Raute in ATP's alpha team said the pension fund had concluded that the ban did not impact on its investment activities nor was there necessarily any "causality" between the move and market movements, given that the euro had since rebounded from its four-year low and equity markets had also recovered.
Raute said investors had moved on from the news quickly and it would be unlikely anyone would be talking about it next week.
When asked if the ban was a ‘red herring' for investors, he said there were more fundamental problems facing investors in the European markets.
Raute said ATP would never undertake naked short selling - that is, shorting without first borrowing the securities being shorted - which he described as a very rare practice.
Given that the ban applies to an uncommon activity and applies to a select number of German sector-specific stocks, he believed it would have minimal impact on the markets generally.
German regulator BAFin has banned investors from shorting leading German banks and insurers, and the bonds of euro-zone countries, without first borrowing the securities being shorted, until 31 March 2011 - so called naked shot selling. It also prohibited the purchase of credit default swaps on euro-zone government bonds, other than for hedging purposes.