By: Mahmoud Gamal
Dubai – Mubasher: Technical short selling saw a strong use through investors since it was launched a month ago, especially in the previous week, while investors aim using hedging instruments, analysts told Mubasher.
On 17 October, the Abu Dhabi Securities Exchange (ADX) started providing technical short selling services, and Al Safwa Mubasher is the only firm that provides this service.
Technical short selling means selling of securities which are not owned by the sellers, but they must be provided in the settlement period T+2, aiming to achieve profits through the prices variation, in case prices decline.
During the previous period the region’s stock markets saw instability in line with a start of anti-corruption crackdown by Saudi Arabia and the government arrested some princes, former ministers, and businessmen accusing them of corruption.
Analysts said that technical short selling saw a strong use during the previous week after an increase in geopolitical tension in the region.
Achieving profits
One of the positive tools of technical short selling is seeing profits while the bourse is in a negative trend, and this occurred the previous week, revealed the CEO of Al Safwa Mubasher, Ehab Rashad.
By the end of the previous week on Thursday, 9 November, the Dubai Financial Market (DFM) fell 4.7% due to the decrease in real estate stocks, and the ADX dropped in line with continue in collecting profits.
Technical short selling will impact positively on investors as it will raise investments and attract liquidity, Rashad added.
Hedging tool
Investors achieved profits in the week before due to using technical short selling, despite the bourses suffered losses after geopolitical tensions in the region, Analyst in Menacorp, Issam Kassabieh said.
The companies must use technical short selling as a hedging tool when the firms are sure of not achieving strong financial results, Kassabieh added.
The implementation of technical short selling in the previous was successful as it led to achieving profits and was understood by investors, the analyst in Menacorp stated.
Caution of geopolitical tension in region
Technical short selling led to achieving profits in the week before as investors sold with high prices, and repurchased at lower prices, in line with the bourse’s drop, Iyad Al Bareeqy, general manager at Al Ansari Financial Services said.
The decrease in the bourse was the not the main reason that made investors start using short selling, but the main reason of using short selling was caution of geopolitical tension that occurred in the region, Al Bareeqy concluded.
Translated by: Mohamed Hesham Azab
