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Australia extends short-selling ban on financials

Discussion in 'General Investing Discussion' started by GBower, 5th Mar, 2009.

  1. GBower

    GBower New Member

    4th Mar, 2009
    Port Moresby
    Is it just me or do the regulators have no idea? Why not ban short calls, long puts, short futures - or any sort of risk management tool? How about banning all sorts of speculation? That might work...

    SYDNEY, March 5 - Australia extended its ban on short-selling of financial stocks on Thursday by almost three months, citing weak markets and defying offshore regulators who have concluded that such bans only made matters worse.

    The Australian Securities and Investments Commission (ASIC) said it would extend its ban until May 31 in a decision that was widely expected given recent attacks on the share prices of local banks, especially investment bank Macquarie Group <MQG.AX>.

    “ASIC has decided to continue with its cautious approach and keep the ban in place,” the commission said in a statement.

    “Any possible loss of market efficiency or price discovery as the result of the continuation of the ban is justified given the current market circumstances,” it added.

    - - -

    Despite the ban, Australian bank shares have continued to tumble, with critics such as hedge funds arguing that the local regulator was persisting with a ban proven to have failed here and elsewhere.

    Macquarie, one of Australia’s most adventurous banks with infrastructure investments worldwide, has lost more than half its value since the short-selling ban was introduced.

    The four major Australian commercial banks—National Australia Bank <NAB.AX>, Commonwealth Bank <CBA.AX>, Westpac <WBC.AX> and ANZ <ANZ.AX> -- have also been sold down heavily.

    The financial sector sub-index <.AXFJ> has lost 38 percent since the start of October, compared with a 31 percent fall in the benchmark S&P/ASX 200 index <.AXJO>.
  2. Tropo

    Tropo Well-Known Member

    17th Aug, 2005
    "Is it just me or do the regulators have no idea? Why not ban short calls, long puts, short futures - or any sort of risk management tool? How about banning all sorts of speculation? That might work...

    It’s a kind of cabaret crossed with an Aussie sunstroke. :rolleyes:
    Do not be surprised if one day regulators will allow only to buy but not sell any stock on ASX...:p
  3. AsxBroker

    AsxBroker Well-Known Member

    8th Sep, 2007
    Sydney, NSW

    Thats funny Tropo :D
  4. Chris C

    Chris C Well-Known Member

    2nd Apr, 2008
    Brisbane, QLD
    Actions like this only raise questions in people's minds as to why the bans are really needed. We all saw what happened to bear sterns when rumours got traction in the markets.
  5. stevenmitchell

    stevenmitchell New Member

    24th May, 2009
    East Setauket, NY
    ASIC Probably Did the Right Thing

    I think ASIC did the right thing. Since when is investing the same as playing a gaming table? Unfortunately, most of those in the market are "playing it" - that is why the Morgan Stanley's and Goldman Sachs' only do about 10% of their business in traditional investment banking, while the majority of their income and revenue comes from "trading". The "investment community" has lost its way in the last 30 years, with no map to get itself back home. All of those profits that the markets are alleged to have generated in the 2000's were produced by central banks authorizing the printing of excess money.

    While the world right now is reeling from the faulty risk assessments of the international banking and investment communities, it also has to deal with the huge overproduction in consumer and commercial products and services that those capital injections created. That will take some time to sort out. Maybe the Australian Securities and Investments Commission wants "investors" (said lightheartedly) to take a breather and maybe think things through - certainly until the financial circulatory system has time to stabilize following its gagging episode. It is also possible that the ASIC wants the sport of investing to change course and return to a more traditional approach. In the United States, where Wall Street still controls public, political and university opinion, the chance that will happen is probably much lower than in Australia.