THE PERCENTAGE of Anglo Irish Bank's stock on loan, which could be used for betting on the bank's share price falling, rose for the fifth month in a row in May, new figures show.
The proportion of Anglo's stock on loan rose to 12.95 per cent in May from 12.78 per cent in April, according to monthly data from the Brussels-based securities settlements firm, Euroclear (formerly Crest), updated this week.
Irish Life Permanent stock on loan rose to 8.21 per cent in May from 7.5 per cent in April. Bank of Ireland's loaned stock rose to 5.97 per cent in May from 5.3 per cent in April. AIB had 2.06 per cent on loan in May, up from 1.75 per cent in April.
Loaned stock gives an indication of the amount of shares that could be used for short-selling, which is essentially a bet that a share price will fall in value. By short-selling, investors sell borrowed shares hoping they can buy them back lower and return them to their original owner. They make a profit on the difference received.
Market sources said that while the Euroclear data may point to the proportion of shares that could be used for short-selling, loaned stock is more often used for other transactions, such as overnight trades or equity financing, which allows shareholders to make money by lending stock on.
The percentage of Anglo stock actually used for short-selling is estimated to be in mid-to-high single digits.
UK companies in weaker sectors tend to have a higher percentage of loaned stock than those in better performing sectors.
Housebuilders such as Barratt Developments and Bovis Homes had loaned stock of more than 15 per cent in May.
Irish housebuilder McInerney had 10.9 per cent of its stock on loan in May, down from 12 per cent in April.
Short-selling is regarded as an acceptable form of stock trading.
The Irish Financial Services Regulatory Authority is progressing its investigation to examine whether short-selling investors took unfair advantage by spreading false rumours while trading on the back of them. The financial regulator is examining unusual share trading in Anglo around St Patrick's Day when the bank's share price fell 15 per cent.
