Asian hedge firms loathe, fear short rule spread
Asian hedge fund managers are waiting with dread to see if tough new short selling restrictions sweep across the region after Australia and Taiwan joined U.S. and UK regulators in cracking down on the practice.
Major Asian markets, such as Japan and Hong Kong, have so far held their fire. But industry executives, many angry with the recent restrictions, said the combination of market volatility and politics makes the outcome impossible to predict.
“My fundamental view is that it is utterly idiotic. In the current market environment, the priority I would have thought would be to encourage liquidity,” said Peter Douglas, founder of Singapore-based hedge fund consultancy GFIA.
“Most regulators that I’ve met have been fundamentally quite sensible people, so you have to make the assumption this is driven a mixture of politics and public opinion. And that makes it very difficult to predict the course.”
Both Australia and Singapore joined the trend by banning or tightening rules on controversial “naked” short selling, in which the share is sold without being borrowed first.
But Australian regulators went further on Sunday by banning covered short selling, in which the seller is first required to first borrow the stock payday loans. The same day, Taiwanese’s regulators said they would reimpose a ban on short-selling shares in 150 top companies.
WHY PAY PERFORMANCE FEES?
Industry executives said regulators in other Asian markets may now feel pressure to follow suit, partly because of fear that big Western hedge funds and other short sellers target the few remaining markets where the practice is not banned outright.
Filed under: economics by Wolf