Investment Guru,Mark Mobius, calls for an end to Short Selling…”Short Selling is Not Investing.We have to seperate Investing from Gambling……We’ve got to get back to the fundamental concept of the stock market-the supply of Capital,the raising money for Growth” says he.
Mr Mobius,with due respect to your justified sentiments in these troubled times,I disagree.
Although I too don’t Short Sell as I believe it creates Wealth by actually Destroying Wealth…if you know what I mean !
But Short Selling has a definitive Role to Play.
Speculation is the lifeline of a thriving Secondary Market.Ofcourse it must be controlled and regulated and not allowed to become wanton or reach dangerous proportions
Short Selling serves the twin purpose of fair price discovery and share availability…it is only it’s misuse that creates the anger and angst.
For example if Infosys in India was traded at an excessive price of Rs 16000,like it did in 2000,at crazy triple digit P/E multiples why should I not be allowed to put my money where my mouth is and short Infosys…It dropped to below Rs 2000 at one stage
I’m sure you wish for Short Selling to be banned across all Asset Classes and Derivatives…..Was George Soros wrong in shorting the British Pound in 1991 to make his Billion ?…The Pound was clearly overvalued at the time as England refused to join the ECU and the Central Bank tried in vain to defend the Pound…If I recall it spend 44 Billion Pounds to do so
Also the Secondary Market will thrive if there is continuous and adequate Liquidity and availability of Stock
By a Blanket ban on Short Selling, as you have strongly called for,Mr Mobius,you would be throwing out the Baby with the Bathwater.