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Asian sec lenders back HK's short selling stance
20 October 2011
Senior figures from both Palsa and Citi have come out in support of last week’s announcement by the CEO of the Securities and Futures Commission that short selling does not seem to have sparked falls in Hong Kong’s stock market
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Pasla
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Hong Kong
Securities lending heads in Asia Pacific have spoken out in support for the announcement by the Hong Kong Securities and Futures Commission (SFC) that short selling does not appear to have caused falls in the city’s stock market.
Ashley Alder, chief executive of the SFC, made the comment last week after newspapers in Hong Kong called into question short selling practices as the market saw a dramatic drop in the price of shares.
Kirtes Bharti, chairman of the Pan Asian Securities Lending Association (Pasla), applauded the commission for showing an understanding of the benefits of securities lending and short selling in promoting market efficiency.
Bharti also spoke in support of the SFC’s decision to propose a reporting regime, but said there might be market participants who might be unsupportive of increasing transparency. He said this attitude was probably down to the extra efforts on firms to meet new rules without causing damage to their businesses.
The Hong Kong regulator’s supportive stance for short selling follows speculation that the practice would be banned in Asian markets after a ban was implemented inSouth Korea from August to November.
The temporary ban, which covers all listed stocks in the Korea Exchange and Kosdaq markets, was called into question by certain market participants who claimed it would stall the development of the country’s domestic hedge fund industry. Bharti said that Pasla does not know if the Korean ban will be lifted across all sectors or if the ban on short selling of financial stocks will remain.
As for the rest of Asia, Anthony McDonald who is director of synthetic equity at Citi in Hong Kong said the firm does not know of any other markets that are looking to ban short selling.
However, McDonald said it is still vital that both people and investors understand how short selling works so they can see both the positive and negative aspects. Education of the practice is certainly on the cards in Asia as Pasla said it hopes to run courses in Asia to increase awareness and understand of securities lending and short selling.