By Alexis Xydias
Jan. 6 (Bloomberg) -- The U.K. is dropping a ban on short- selling of financial stocks after they fell three times more than the broader market and banks posted their biggest quarterly slump in at least two decades.
The CHART OF THE DAY shows the 28 percent drop of an index consisting of the companies that Britain’s Financial Services Authority prohibited hedge funds and other investors from shorting after politicians and investors blamed the practice for market instability.
The basket of stocks is shown with the blue line, while the green line depicts the 68 percent slump in shares of Edinburgh- based Royal Bank of Scotland Group Plc, the group’s worst performer since the ban was introduced on Sept. 18. The purple line represents the broader FTSE All-Share Index’s 8.4 percent decline over the same period.
“They banned a popular trade but didn’t stop the banking sector from massively underperforming,” said Nick Batsford, a London-based analyst at Hobart Capital Markets Ltd. “The financial sector has been absolutely horrific and I am convinced were it not for the ban they would have gone down further. The lifting may show what the real sentiment is as this was not a free market.”
The protection on stocks including RBS, Edinburgh-based HBOS Plc and London-based Barclays Plc will expire on Jan. 16, the FSA said yesterday in a statement. The London-based agency said it could be reintroduced without consultation if necessary.
By Alexis XydiasJan. 6 (Bloomberg) -- The U.K. is dropping a ban on short- selling of financial stocks after they fell three times more than the broader market and banks posted their biggest quarterly slump in at least two decades.
The CHART OF THE DAY shows the 28 percent drop of an index consisting of the companies that Britain’s Financial Services Authority prohibited hedge funds and other investors from shorting after politicians and investors blamed the practice for market instability.
The basket of stocks is shown with the blue line, while the green line depicts the 68 percent slump in shares of Edinburgh- based Royal Bank of Scotland Group Plc, the group’s worst performer since the ban was introduced on Sept. 18. The purple line represents the broader FTSE All-Share Index’s 8.4 percent decline over the same period.
“They banned a popular trade but didn’t stop the banking sector from massively underperforming,” said Nick Batsford, a London-based analyst at Hobart Capital Markets Ltd. “The financial sector has been absolutely horrific and I am convinced were it not for the ban they would have gone down further. The lifting may show what the real sentiment is as this was not a free market.”
The protection on stocks including RBS, Edinburgh-based HBOS Plc and London-based Barclays Plc will expire on Jan. 16, the FSA said yesterday in a statement. The London-based agency said it could be reintroduced without consultation if necessary.
The FTSE All-Share Banks Index tumbled 38 percent last quarter, the index’s worst performance since at least 1986, data compiled by Bloomberg show.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net
The FTSE All-Share Banks Index tumbled 38 percent last quarter, the index’s worst performance since at least 1986, data compiled by Bloomberg show.
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net
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