American and British hedge funds sparked a new wave of betting against companies in continental Europe, immediately after the short selling bans in six countries expired this week.
Citadel, Millennium Management and Marshall Wace were among the funds that sold stocks as soon as France, Italy, Spain, Austria, Greece and Belgium lifted their restrictions just before midnight Monday.
On Tuesday and Wednesday, the proportion of regulatory disclosures in these six countries that showed an increase in a short position reached 75%, its highest level this year, according to analysis by the Breakout Point data group.
“It’s almost as if the demand that has been contained for many weeks has finally been unleashed,” said Breakout Point founder Ivan Cosovic.
Among the stocks that the funds sold short, we find Air France-KLM, against which Sandbar Asset Management and Marshall Wace bet, the French cable operator Nexans and the Spanish renewable energy firm Ence Energia Y Celulosa. The American giant Millennium has strengthened its short position on the latter.
Marshall Wace also increased his bet against the Italian Banco BPM to 0.83% of the outstanding shares, while Citadel increased his bets against the Italian energy services company Saipem and the French auto parts company Valeo Tuesday and Wednesday.
Marshall Wace, Millennium and Citadel declined to comment, while Sandbar did not respond to requests for comment.
The news of the short positions should relaunch the debate on the effectiveness of the ban on such bets.
Regulators introduced the restrictions in mid-March, as markets collapsed and investors struggled to assess the economic impacts of the coronavirus. The month-long bans were then renewed in April.
The executive director of FMA, the Austrian market regulator, said that the restrictions had “contributed significantly to absorb excessive irrational market reactions”, while the French regulator the AMF stressed the “normalization” of volatility implied by the market index.
However, critics of the bans say that short selling adds to market liquidity and helps to bubble up. They also point out that bets on one security are often offset by “long” positions on another security, often in the same industry.
British regulator FCA said in March that there was “no evidence” that the short sale had caused share prices to fall. Jack Inglis, director of the global hedge fund industry, AIMA, said last week that such bans “do not achieve their objectives, but harm the market and disadvantage end investors.”
This week’s Breakout Point data, which includes only positions taken Tuesday and Wednesday, showed that a higher proportion of short positions increased than the approximately 60% recorded for the week of March 9, when stocks plunged to the stronger fears. the pandemic.
Trade has experienced a strong recovery in volumes traded this week. Just over 44.7 billion euros in shares changed hands on Tuesday, the first day after the restrictions expired, according to data from CBOE Europe. This was the highest daily total in May and also higher than the average daily volume of 39.9 billion euros in April. The Paris, Milan and Madrid stock exchanges, which are subject to the ban, also had their most active days of the month.
