17/08/2011 Author: Tony Griffiths

EU financial stock lower than market average

Loan levels of the stock of financial companies restricted by last week’s European short-selling bans have been below the market average in three of the four affected countries throughout 2011, market data shows, suggesting hedge funds and other borrowers haven’t been especially active in those markets.

Last Thursday, after a late-night conference call with representatives of all 27 regulators represented by Esma, France, Italy, Spain and Belgium choose to ban the shorting of stock in their financial firms. The move followed a full week of heighted market volatility in Europe and around the globe – the worst seen in two years.  

However, according to research firm Data Explorers, during 2011 only Italy has had more interest from borrowers in its financial stock than general stock, with 2.4% of the now-restricted stock out on loan, compared to 1.2% of outstanding Italian equity.  

France, Spain and Belgium, meanwhile, all have lower averages for outstanding loaned financial stock than for outstanding loaned equity in general (see box). “This suggests low institutional ownership of these stocks,” Data Explorers analysis said.  

Data Explorers also notes that the average in Italy is skewed by a very large loan outstanding for Banca Popolare di Milano, one of the country’s largest banks, which has been in place since March. Excluding the bank, the average across the financial stocks falls from 2.4% to 1.4%, marginally above Italy’s market average of 1.2%.