Flags decorate the working areas of traders as they monitor financial information on the floor of the Borsa Istanbul, the stock exchange in Istanbul. A bank on shorting seven domestic banks last month initially pushed up their shares, helped by a broader market gain, but volumes slumped before later recovering. Bloomberg
Flags decorate the working areas of traders as they monitor financial information on the floor of the Borsa Istanbul, the stock exchange in Istanbul. A bank on shorting seven domestic banks last month initially pushed up their shares, helped by a broader market gain, but volumes slumped before later recovering. Bloomberg
Flags decorate the working areas of traders as they monitor financial information on the floor of the Borsa Istanbul, the stock exchange in Istanbul. A bank on shorting seven domestic banks last month initially pushed up their shares, helped by a broader market gain, but volumes slumped before later recovering. Bloomberg
Flags decorate the working areas of traders as they monitor financial information on the floor of the Borsa Istanbul, the stock exchange in Istanbul. A bank on shorting seven domestic banks last month

Short-selling of shares banned in Turkey as South Korea and Italy weigh up action


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New moves to curb short-selling in some countries have set the stage for a renewed battle between free market advocates and authorities aiming to check investors they see as profiteers who destabilise major companies.

Turkey's regulator banned short-selling of seven domestic banks last month after US prosecutors charged state lender Halkbank with Iranian sanctions violations.

South Korea is considering restrictions while European authorities are investigating short-sellers over alleged market manipulation — part of a nascent trend that Carson Block, founder of US short-seller Muddy Waters Capital, decried to Reuters as a "global war against truth".

Meanwhile, as Brexit looms, authorities in Frankfurt, Rome and Amsterdam could temporarily curb short-selling of companies to counter price swings triggered by the European divorce, officials have told Reuters.

The effectiveness of such bans has been questioned by some academics and institutions including the Federal Reserve Bank of New York. But the global mood may be increasingly turning against short-sellers, who borrow shares and immediately sell them, betting the price will fall before they buy back the shares and return them, pocketing the difference.

Brexit and the US-China trade war are among political and macroeconomic forces that have buffeted markets, posing new conundrums for regulators. South Korean officials, for example, cited the trade conflict as a reason for their possible shorting curbs.

Such prohibitions have declined significantly since 2008-2012, when authorities moved to buttress tumbling markets during the global financial and European debt crises.

The former saw about 20 countries ban shorts of a total of more than 7,000 stocks, while the latter triggered bans of around 1,700 shares, according to a 2018 study from the European Systemic Risk Board, which oversees the EU financial system.

"While short-selling can be a valid trading strategy, when used in combination with spreading false market rumours this is clearly abusive," the European Securities and Markets Authority (ESMA) said in 2011 as short-selling bans swept Europe.

The EU agency said countries instituted the bans to restrict the benefits of spreading false rumours or to achieve a regulatory level playing field.

Critics of bans, however, say they undermine free markets, as well as limiting accurate asset-pricing and dampening trading volumes, raising transaction costs for all investors.

Richard Payne, a professor at London's Cass Business School, said that research suggested "the real effect of these bans is simply to increase trading costs and reduce trading activity".

A New York Fed review of more than 400 US financial stocks over the 14 days that short-sale bans were in effect in late 2008, for example, showed they did not have the intended effect.

Those shares had an average price decline of 12 per cent during that period, largely in line with non-financial stocks not subject to restrictions. Meanwhile, trading costs for those stocks are estimated to have risen more than $600 million (Dh2.2bn) against averages, according to the 2012 report.

"Our analysis … suggests that the bans had little impact on stock prices," it said, acknowledging that the specific causes of the price movements were unclear. "At the same time, the bans lowered market liquidity and increased trading costs."

A 2017 analysis of short bans by ESMA also found there was no statistically significant impact on share prices or liquidity.

The EU agency, however, remains committed to select interventions. This year, it backed Germany's two-month short sale ban on payment firm Wirecard following a disputed media report of financial irregularities as "appropriate and proportionate to address the threat to German financial markets".

Fabio De Masi, a left-leaning German lawmaker, told Reuters that short-selling bans could be legitimate policy tools for dealing with traders who unjustly sought profits and could trigger market panic, even if their efficacy could vary.

The real effect of these bans is simply to increase trading costs and reduce trading activity

He generally questioned the value of short-sellers and said that hedge funds should be regulated. "Not every financial player or innovation is beneficial to our economy," he added.

The Turkish ban initially pushed up bank stocks, helped by a broader market gain. While trading volumes dropped to lows for the year in the following days, they have since started to creep back closer to pre-ban levels.

Financial regulators in Germany and France declined to comment for this story. Borsa Istanbul, the Turkish stock exchange and a financial supervisor, did not respond to a request for comment.

Short sale bans are not recent market phenomena; they have roots in the early 1600s, when authorities intervened to support shares of the Dutch East India Company.

Some critics, like Block of Muddy Waters, see bans and other actions against shorts as part of a broader political narrative.

"The restrictions are a way of codifying the 'fake news' moniker that really means 'truthful but uncomfortable news'," Block said.

He added that after Germany and France opened investigations into short-sellers for their bets against companies there, he hesitated to speak publicly about his short positions in both countries.

State prosecutors in Germany, France and Italy have investigated short-sellers related to their research and bets against Wirecard, French retailer Casino and Italian bio-plastics maker Bio-on, respectively.

Dan David, another US short seller, known for betting against Chinese companies, said he feared similar actions by global regulators if a recession hits.

"This kind of intervention never works in the long term but never fails politically in the short term," he added.

Khaled Abdel Majeed, founder of London-based hedge fund firm Mena Capital, said the Turkish ban was a sign of economic weakness and that he was inclined to stay out of the country.

"Any country that tries to influence the market by issuing new laws, that's not a good sign," he said.

Kerr Neilson, founder of $17 billion global equity investor Platinum Asset Management in Sydney, said that departures from global free-trade norms were accelerating, which could include more government action against short-sellers.

"We're living in a world of interventions," he said.

The biog

Name: Timothy Husband

Nationality: New Zealand

Education: Degree in zoology at The University of Sydney

Favourite book: Lemurs of Madagascar by Russell A Mittermeier

Favourite music: Billy Joel

Weekends and holidays: Talking about animals or visiting his farm in Australia

The specs: 2018 Ford F-150

Price, base / as tested: Dh173,250 / Dh178,500

Engine: 5.0-litre V8

Power: 395hp @ 5,000rpm

Torque: 555Nm @ 2,750rpm

Transmission: 10-speed automatic

Fuel consumption, combined: 12.4L / 100km

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This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.

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The specs: 2018 Chevrolet Trailblazer

Price, base / as tested Dh99,000 / Dh132,000

Engine 3.6L V6

Transmission: Six-speed automatic

Power 275hp @ 6,000rpm

Torque 350Nm @ 3,700rpm

Fuel economy combined 12.2L / 100km

The specs: 2018 Nissan 370Z Nismo

The specs: 2018 Nissan 370Z Nismo
Price, base / as tested: Dh182,178
Engine: 3.7-litre V6
Power: 350hp @ 7,400rpm
Torque: 374Nm @ 5,200rpm
Transmission: Seven-speed automatic
​​​​​​​Fuel consumption, combined: 10.5L / 100km

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The specs: 2019 Haval H6

Price, base: Dh69,900

Engine: 2.0-litre turbocharged four-cylinder

Transmission: Seven-speed automatic

Power: 197hp @ 5,500rpm

Torque: 315Nm @ 2,000rpm

Fuel economy, combined: 7.0L / 100km

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Sector: Generative AI
Initial investment: Undisclosed
Investment stage: Series A
Investors: Core42
Current number of staff: 47
 

 

 

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How to apply for a drone permit
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THE DETAILS

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PROFILE OF HALAN

Started: November 2017

Founders: Mounir Nakhla, Ahmed Mohsen and Mohamed Aboulnaga

Based: Cairo, Egypt

Sector: transport and logistics

Size: 150 employees

Investment: approximately $8 million

Investors include: Singapore’s Battery Road Digital Holdings, Egypt’s Algebra Ventures, Uber co-founder and former CTO Oscar Salazar

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Tributes from the UAE's personal finance community

• Sebastien Aguilar, who heads SimplyFI.org, a non-profit community where people learn to invest Bogleheads’ style

“It is thanks to Jack Bogle’s work that this community exists and thanks to his work that many investors now get the full benefits of long term, buy and hold stock market investing.

Compared to the industry, investing using the common sense approach of a Boglehead saves a lot in costs and guarantees higher returns than the average actively managed fund over the long term. 

From a personal perspective, learning how to invest using Bogle’s approach was a turning point in my life. I quickly realised there was no point chasing returns and paying expensive advisers or platforms. Once money is taken care off, you can work on what truly matters, such as family, relationships or other projects. I owe Jack Bogle for that.”

• Sam Instone, director of financial advisory firm AES International

"Thought to have saved investors over a trillion dollars, Jack Bogle’s ideas truly changed the way the world invests. Shaped by his own personal experiences, his philosophy and basic rules for investors challenged the status quo of a self-interested global industry and eventually prevailed.  Loathed by many big companies and commission-driven salespeople, he has transformed the way well-informed investors and professional advisers make decisions."

• Demos Kyprianou, a board member of SimplyFI.org

"Jack Bogle for me was a rebel, a revolutionary who changed the industry and gave the little guy like me, a chance. He was also a mentor who inspired me to take the leap and take control of my own finances."

• Steve Cronin, founder of DeadSimpleSaving.com

"Obsessed with reducing fees, Jack Bogle structured Vanguard to be owned by its clients – that way the priority would be fee minimisation for clients rather than profit maximisation for the company.

His real gift to us has been the ability to invest in the stock market (buy and hold for the long term) rather than be forced to speculate (try to make profits in the shorter term) or even worse have others speculate on our behalf.

Bogle has given countless investors the ability to get on with their life while growing their wealth in the background as fast as possible. The Financial Independence movement would barely exist without this."

• Zach Holz, who blogs about financial independence at The Happiest Teacher

"Jack Bogle was one of the greatest forces for wealth democratisation the world has ever seen.  He allowed people a way to be free from the parasitical "financial advisers" whose only real concern are the fat fees they get from selling you over-complicated "products" that have caused millions of people all around the world real harm.”

• Tuan Phan, a board member of SimplyFI.org

"In an industry that’s synonymous with greed, Jack Bogle was a lone wolf, swimming against the tide. When others were incentivised to enrich themselves, he stood by the ‘fiduciary’ standard – something that is badly needed in the financial industry of the UAE."

MATCH INFO

Tottenham Hotspur 3 (Son 1', Kane 8' & 16') West Ham United 3 (Balbuena 82', Sanchez og 85', Lanzini 90' 4)

Man of the match Harry Kane

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

The specs

Engine: 2.0-litre 4cyl turbo

Power: 261hp at 5,500rpm

Torque: 405Nm at 1,750-3,500rpm

Transmission: 9-speed auto

Fuel consumption: 6.9L/100km

On sale: Now

Price: From Dh117,059

Moonfall

Director: Rolan Emmerich

Stars: Patrick Wilson, Halle Berry

Rating: 3/5

Meydan race card

6.30pm: Maiden; Dh165,000; (Dirt) 1,200m
7.05pm: Handicap; Dh170,000; (D) 1,200m​​​​​​​
7.40pm: Maiden; Dh165,000; (D) 1,900m​​​​​​​
8.15pm: Handicap; Dh185,000; (D) 2,000m​​​​​​​​​​​​​​
8.50pm: Handicap; Dh185,000; (D) 1,600m​​​​​​​
9.25pm: Handicap; Dh165,000; (D) 2,000m

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PSL FINAL

Multan Sultans v Peshawar Zalmi
8pm, Thursday
Zayed Cricket Stadium, Abu Dhabi

Australia (15-1): Israel Folau; Dane Haylett-Petty, Reece Hodge, Kurtley Beale, Marika Koroibete; Bernard Foley, Will Genia; David Pocock, Michael Hooper (capt), Lukhan Tui; Adam Coleman, Izack Rodda; Sekope Kepu, Tatafu Polota-Nau, Tom Robertson.

Replacements: Tolu Latu, Allan Alaalatoa, Taniela Tupou, Rob Simmons, Pete Samu, Nick Phipps, Matt Toomua, Jack Maddocks.

500 People from Gaza enter France

115 Special programme for artists

25   Evacuation of injured and sick