The Hong Kong arm of the Alternative Investment Management Association, the London-based hedge fund industry association, has praised the Hong Kong Securities and Futures Commission for ma
The Hong Kong arm of the Alternative Investment Management Association, the London-based hedge fund industry association, has praised the Hong Kong Securities and Futures Commission for maintaining its existing short selling rules rather than joining the global movement to bar short selling of financial stocks or require publication of short positions.
‘The Hong Kong government has shown leadership in its decision to allow the continuation of normal trading activities, including covered short selling, in the Hong Kong equities market,’ says Christophe Lee, chairman of Aima’s Hong Kong chapter.
‘The SFC’s regulation and stance preserves international investors’ confidence in the integrity and standing of Hong Kong’s markets.’
Aima argues that short selling has been widely acknowledged by regulators and governments as a legitimate component of orderly financial markets, adding market liquidity and assisting in efficient price discovery.
While describing as ‘understandable’ the efforts by regulators and governments to restore financial stability, the association says it doubts whether the emergency bans on short selling issued by regulators around the world in recent days will achieve the intended results
‘These measures have the potential to lead to unfortunate consequences, including an increase in the cost of capital for banks, at a time when it is most needed, and incorrect pricing of index products, with negative implications for mainstream retail products,’ Aima says.
The organisation has urged regulators to review their restrictions on short selling at the earliest opportunity, but says it continues to offer support toward other efforts to bring stability to international financial markets.
Aima has more than 1,280 corporate members in 47 countries including hedge fund managers, fund of hedge funds managers, prime brokers, providers of legal and accounting services and fund administrators.
