Sharechat Logo

Profits to reap in selling yourself short

By Michele Simpson

Friday 20th October 2000

Text too small?
Canny investors have found a way to turn a profit from our flagging sharemarket.

Selling a stock and then buying it back at a lower price - short-selling - is relatively unheard of here but has recently started attracting more investors, especially those scalping Telecom and Fletcher Forests stocks.

Fletcher Forests has been as high as $1.30 but sank to about 38c after the Commerce Commission knocked back Shell's bid to buy Fletcher Energy.

Telecom, which used to account for a third of the value of the Stock Exchange, has also been on a steady beat downward since May when the share price was over $8.50 - it has since dipped to $5.30.

The Stock Exchange recently opened up short-selling to all traded stocks rather than just limiting it to those in the NZSE40, which has dropped 13.9% since January.

In Australia, the US and the UK short-selling is a well-known practice. Overseas there has been a frenzy of short-selling with technology stocks.

Ord Minnett manager of security lending Tony Vincent said short-selling might provide much needed liquidity for the Stock Exchange - a reason given by offshore investors for not putting money in New Zealand stocks.

Not many broking firms here offer short-selling to their clients because they have to be big enough and carry enough capital to buy the stocks first.

Clients who want to short-sell have to pay a 20% deposit to the broker first.

But the process of short-selling is still considered easier than buying an option on the New Zealand Futures and Options Exchange.

"Short-selling is definitely gaining momentum and I am sure more brokers will start offering the service," Mr Vincent said.

Simon Allen, chairman of the New Zealand Stock Exchange said short-selling had not been popular for brokers because of the tax implications.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar falls against Aussie after jobs data there
Sky CEO put on notice by chunky vote against salary share scheme
Unions gearing up to oppose 'market tests' on Fair Pay Agreements
Mandatory farm plans scorned as 'tick box' exercises
Kiwi dollar firms on weak US retail data, capped by rate-cut expectations
17th October 2019 Morning Report
SkyCity hoses down union claims over potential job losses
OPINION: Fair Payment Agreements and 'swallowing vomit' - the lot of the CTU
MARKET CLOSE: NZ shares gain; Restaurant Brands climbs on upbeat outlook
NZ dollar stalls after Bascand's rate cut comments

IRG See IRG research reports