LONDON (Reuters) – A cluster of big name hedge funds have started betting against French companies, moving in after the lifting of a short-selling ban imposed earlier this year to calm financial markets, an analysis of regulatory filings showed.
France joined Italy, Spain, Belgium, Austria and Greece in dropping short-selling bans last week. They had banned the practice for many stocks two months ago to curb extreme stock market volatility caused by economic uncertainty that has resulted from the coronavirus lockdowns.
Hedge funds engage in so-called “short-selling” by borrowing a stock from an institutional investor, such as a pension fund, and selling it back when the shares fall, pocketing the profit.
Financial market regulators have banned short-selling during bouts of stock market turbulence in the past because of a perception it can add to market instability.
Regulatory filings in the seven days since the bans ended showed that France accounted for more than half the 125 regulatory notifications of changes to short positions against companies in the six markets.
Citadel, Marshall Wace and Millennium are among hedge funds that have taken out short positions on French companies over the past week, with Peugeot (PEUP.PA) and Air France-KLM (AIRF.PA) among the most prominent targets.
British hedge fund Sandbar Asset Management took the opportunity to double its short position in Air France to 1.2% of the company’s equity capital on May 20, from 0.6% on March 17.
London-based Marshall Wace also added to its bet against Air France last week. It rose to 2.72% on May 20 from 2.66% on March 31.
Hedge fund Millennium has made a short bet on payments company Worldline (WLN.PA), while automaker Peugeot and cable industry leader Nexans (NEXS.PA) have also attracted hedge fund short sellers.
American hedge fund Citadel added to short positions in automotive supplier Valeo (VLOF.PA) and CGG (GEPH.PA), a manufacturer of geophysical equipment.
European short-selling laws mean only bets against companies of 0.5% and above need to be publicly disclosed. It was also not known if hedge funds had offsetting long positions.
Citadel, Millennium, Sandbar and Marshall Wace all declined to comment on their short positions.
Reporting by Maiya Keidan. Editing by Jane Merriman