Sunday, October 12, 2008

FSA refuses to extend short-selling ban to housebuilding

Financial watchdogs have dashed housebuilders' hopes of their shares being protected from short-selling.

Leaders of the Financial Services Authority (FSA) acted last month to ban short-selling in finance stocks following the recent meltdown in the markets.

The FSA vowed to "extend this approach to other sectors if it judges it to be necessary".

Housebuilders had been hoping that the authority would look at their case in the wake of the decimation of the share price of major players such as Barratt and Persimmon.

But an FSA spokeswoman told CJ: "At the moment, our position is that these restrictions will only apply to shares in financial institutions like banks, insurance companies and conglomerates with a finance component."


FSA refuses to extend short-selling ban to housebuilding


Short-selling is dominated by hedge funds. Speculators borrow stock then hope to buy it back cheaper at a later date when the price falls.

They profit from falling share prices and have been blamed for spreading market rumours to drive down prices.

The finance and housing sectors have been hardest hit by share price falls, but analysts do not believe housebuilders need the same protection from short-selling as banking giants.

Rachel Waring, a housebuilding analyst at stockbrokers Panmure Gordon, said: "I would assume the government is very concerned about the impact of shorting on the banking sector. If a housebuilder went bust it wouldn't affect the economy in the same way as if HBOS went bust.

"I don't know how much stock is out on loan in the housebuilding sector at the moment. The housebuilders have been affected really badly recently, but a lot of short positions have been closed in the housebuilding sector and many shares have recovered apart from Taylor Wimpey."

Steve Turner of the Home Builders Federation said: "We would welcome any measures that improve financial stability in the markets at the moment."