Investors aren’t exactly leaping with abandon into banking shares today, but at least they are managing to bounce off their lows set in early morning trading. The finger of blame for the current collapse in banking shares is starting to point at the short sellers once again. John McFall, chairman of the Treasury committed wrote to the head of the FSA asking them to investigate anecdotal evidence that some hedge funds have been shorting stocks.
It is almost inevitable that the short sellers get the blame, they are after all a convenient target. However, it should be recognised that conventional investors selling their holdings in droves can have a greater effect on a share price. After nationalisation of railtrack and Northern Rock, investors could be forgiven for taking their cash and running at the faintest whiff of nationalisation for Barclays, RBS or Lloyds. While the short sellers may be playing a part, it is record losses, ongoing rumours and unquantifiable risks that rattle share prices the most.
With this regard, news that Obama’s team is getting down to business on the economic recovery plan has helped markets stabilise somewhat today.
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