Brexit episode V: Return of the short sellers
29 June 2016 London
Image: Shutterstock
Short sellers that had reduced their positions in the lead up to the UK’s EU referendum came back strongly to target UK banks once ‘Brexit’ was confirmed, according to FIS Astec Analytics.
David Lewis, senior vice president at FIS Astec Analytics, said: “Short interest in UK commercial banks rose by 28 percent since Friday (24 June) and is up 91 percent compared with one week ago.”
“Short sellers may have been playing out of position ahead of the Brexit poll but are now moving quickly to take advantage of the pressure UK bank shares find themselves under.”
The pound fell 11 percent even before the result was formally confirmed and the following days saw banks with the closest ties to the UK economy suffer a significant drop-off in share price.
Royal Bank of Scotland and Barclays were among those hit hardest after the result, with circuit breakers being applied to both the FTSE-listed banks after their share price dropped by more than 8 percent within the first two hours of trading on Monday (27 June) morning.
In a research note published in SLT 142 on 21 June, ahead of the referendum, Lewis commented: “Uncertainty brings prices down as investors dial down risk and rush to reduce their exposure by buying into safe haven assets.”
“The evidence of such behaviour was seen very recently as 10-year German government bond yields turned negative, indicating that investors value the creditworthiness of Germany so much that they are willing to pay to lend them money.”
David Lewis, senior vice president at FIS Astec Analytics, said: “Short interest in UK commercial banks rose by 28 percent since Friday (24 June) and is up 91 percent compared with one week ago.”
“Short sellers may have been playing out of position ahead of the Brexit poll but are now moving quickly to take advantage of the pressure UK bank shares find themselves under.”
The pound fell 11 percent even before the result was formally confirmed and the following days saw banks with the closest ties to the UK economy suffer a significant drop-off in share price.
Royal Bank of Scotland and Barclays were among those hit hardest after the result, with circuit breakers being applied to both the FTSE-listed banks after their share price dropped by more than 8 percent within the first two hours of trading on Monday (27 June) morning.
In a research note published in SLT 142 on 21 June, ahead of the referendum, Lewis commented: “Uncertainty brings prices down as investors dial down risk and rush to reduce their exposure by buying into safe haven assets.”
“The evidence of such behaviour was seen very recently as 10-year German government bond yields turned negative, indicating that investors value the creditworthiness of Germany so much that they are willing to pay to lend them money.”
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