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short selling

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    Article in this morning's Herald Sun in Melbourne, also reinforced by Bell Potters Srategic Themes which just landed on my desk - short selling is alive and well, and substantiates NM's comments to Phil1 yesterday. Possibly why Danube is trying to drive down the price, despite his comments to the contrary.

    Short-sell probed by watchdog
    Colin Brinsden
    February 22, 2008 12:00am

    AUSTRALIA'S investment watchdog is investigating the stock market trading practice of short-selling to see if it is adding to volatility in share prices, a Senate committee heard yesterday.
    Short-selling is a common practice among private investment funds, or hedge funds - selling shares they don't own with the intention of buying the shares back later, at a lower price, to book a profit.
    It came amid differing opinion about whether hedge funds are causing fluctuations.
    "It is a myth that hedge funds are driving the markets' volatility," UBS analysts said this week. "Selling pressure has come from local funds plus the international long funds."
    UBS said locals sold Leighton after last week's result "while we actually had two hedge fund buy orders".
    Some local stocks have been named as targets of hedge funds.
    Those include companies which might have high debt levels or whose directors have been or are rumoured to be exposed to margin loans, such as Allco, Centro or ABC Learning Centres.
    The Australian Securities and Investment Commission is investigating whether hedge funds have colluded by targeting specific shares that have a large number of margin calls which, if triggered, would force the price of those shares down.
    Margin lending is a practice whereby an investor pays for only a percentage of a stock but is liable to pay more if the price falls to a certain level or sell the shares.
    ASIC chairman Tony D'Aloisio told the Senate's economics committee that hedge funds played an important role by providing liquidity to the markets.
    But he said he did not condone practices that could amount to insider trading or market manipulation.
    "We are looking at that, as to whether it involves collusion," he said.

    "If it involves collusion it will probably most likely be market manipulation."
    The Australian Securities Exchange yesterday said it was looking at clarifying the transparency of short-selling.
    While net short positions have to be declared, the ASX said there were differing opinions among some users of the market about what had to be declared.
 
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