ASIC's ban on short-selling has made Australia look foolish to overseas investors, according to a hedge fund CIO.
ASIC's curfew on short-selling was overdone and has made Australia look foolish to overseas investors, hedge fund operator Fortitude Capital chief investment officer John Corr said.
Despite tweaks to the ban announced on September 23, the regulator's rulings continue to have a major impact on trading in Australia, particularly in derivatives and hybrids, he said.
"There is still a lot of confusion among Australian investors and brokers as to what can and cannot be done," Corr said.
"We continue to be questioned by our overseas investors on why this has happened and when it will be resolved, and they continue to ask whether Australia is a viable place for them to invest."
Corr said ASIC's move to ban just naked short-selling on Friday, September 19, was a measured response.
But that changed when on Sunday, September 21, ASIC disallowed covered short-selling on all Australian stocks, while United Kingdom and United States authorities kept their short-selling freeze on financial shares.
The short-selling debate has been a worldwide phenomenon, however, Australia's reaction has been stronger than anywhere else in the developed world and no one can explain why, Corr said.
ASIC chairman Tony D'Aloisio said in a statement on Sunday, September 21: "To limit the prohibition to financial stocks... could subject our other stocks to unwarranted attack, given the unknown amount of global money which may be looking for short-sell plays."
Corr said yesterday: "Why did [D'Aloisio] not make that comment on Friday afternoon? Did he just realise that Australia was the first market to open on Monday?
"We believe someone has said something to ASIC and probably to politicians, to get a reaction in their favour and it has made Australia look very foolish."
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