WHEN everyone else was bracing themselves for turkey and plum pudding last month, City fund managers were busy borrowing stock they did not own in the hope of pocketing a profit.
That is the message from December figures released by stock market settlement firm CrestCo, showing institutional investors lent 20.3% of shares in supermarkets group Wm Morrison, 23.4% of pubs operator Mitchells Butlers and 20.2% of Man Group.
Heavy stock lending often reflects short-selling by hedge funds hoping to profit from a share-price fall.
Stephen Grainger, product manager at CrestCo, says heavy stock lending can also be connected to the “voting season”as institutions borrow stock from other funds ahead of a company’s annual meeting to increase their voting power on a contentious resolution.
One expert says: “If you have allowed for any special factors and still see the percentage of lending increasing on a stock, you can conclude some large investors are taking a negative view.”
But the hedge funds might get it wrong, in which case a rising share price would squeeze their short positions, forcing them to buy shares to reduce their exposure, driving up the price even faster Angus McCrone has a spread-bet website at: www.onewaybet.com
