Greece’s securities regulator has extended a short-selling ban on bank shares to the end of July to protect investors while the recapitalisation of the country’s cash-strapped lenders is completed.

Short-selling involves investors borrowing shares to sell on the market and later buying them back at a lower price to make a profit. Greek banking stocks have been heavily shorted as investors bet that stock prices would fall further during the country’s sovereign debt crisis.

“The board took into consideration the ongoing bank recapitalisation process,» the Capital Markets Commission said in a statement, confirming an earlier Reuters story.

A short-selling ban on all stocks was introduced in August 2011 to protect investors from the fallout of the country’s debt crisis. Greece scrapped the ban on short selling non-banking stocks in January as market confidence grew after the country averted bankruptcy last year.

The regulator said that the three-month extension has been approved by the European Securities and Markets Association (ESMA).

European banks will need to shed as much as another €3.4tn from their balance sheets over the coming years by reducing lending and selling assets according to new data, adding to fears about a funding gap opening for European corporates.

Europe was already bracing itself for about €2.4bn of “non-core” asset disposals – more than 7 per cent of total banking assets – over the next seven years as banks are mandated to reduce the risk on their balance sheets.

But new figures from PwC, the consultancy, to be released on Tuesday, suggest the problem of banks retreating from their traditional lending activities could be far worse than expected.

While in 2012 banks shed €600bn-worth of assets to help comply with upcoming regulation, at the same time they admitted an extra €500bn of “non-core” assets on their books that was previously unaccounted for and would need to go as well.

Following this data, PwC is now predicting up to another €1tn of fresh admissions in the coming years as banks look to meet with Basel III regulatory requirement. Nearly 90 per cent of deleveraging last year was focused on reducing lending. >> Read More

Kyle Bass, addressing Chicago Booth’s Initiative on Global Markets last week, clarified his thesis on Japan in great detail, but it was the Q&A that has roused great concern. “The AIG of the world is back - I have 27 year old kids selling me one-year jump risk on Japan for less than 1bp – $5bn at a time… and it is happening in size.” As he explains, the regulatory capital hit for the bank is zero (hence as great a return on capital as one can imagine) and “if the bell tolls at the end of the year, the 27-year-old kid gets a bonus… and if he blows the bank to smithereens, ugh, he got a paycheck all year.” Critically, the bank that he bought the ‘cheap options’ from recently called to ask if he would close the position - “that happened to me before,” he warns, “in 2007 right before mortgages cracked.” His single best investment idea for the next ten years is, ”Sell JPY, Buy Gold, and go to sleep,” as he warns of the current situation in markets, “we are right back there! The brevity of financial memory is about two years.”

The main thrust of the discussion is Bass’ thesis on Japan’s pending collapse - which we wrote in detail on here, here, and here - and while the details of this thesis should prepare most for the worst, it is the Q&A that provides some very clear insights into just what is going on in the world.

Starting at around 50:00… >> Read More

Greece’s capital markets regulator Monday extended its ban on short selling of banking shares through April, citing extraordinary market conditions.

In a statement, the Capital Markets Commission said it took into consideration “the banks’ recapitalization plan–which is in progress–as well as the recent macroeconomic developments in the country”.

The decision is subject to approval by the European Securities and Markets Association.

The finance ministry is planning to scrap the tax on short-term capital gains arising from the sale of shares and the units of equity-oriented mutual funds.

Top finance ministry officials said a decision on the issue is likely to be taken before next month’s budget.

Officials say the move would provide a big boost to the capital markets as the tax break would benefit investors in India as well as foreign funds pumping money into Indian bourses. Officials said the move could not only stop foreign funds from “treaty shopping” — setting up offices in Mauritius for instance to take advantage of the provisions of that nation’s double taxation agreement with India — but also encourage many of them to set up offices in India.

“The tax (STCG) earns about Rs 350 to Rs 400 crore and causes a lot of litigation … this is one reason why the government is planning to scrap it,” officials added.

However, the STCG tax does not apply to cases such as the Vodafone purchase of Hutchison Whampoa’s 67 per cent stake in Hutchison Essar in April 2007. >> Read More

ICICI Bank has raised SGD 225 million (Singapore dollars) from a seven-year bond sale programme through its Dubai branch at a coupon rate of 3.65%.

“We have successfully raised SGD 225 million through our Dubai branch yesterday at a coupon rate of 3.65 percent. Significantly, the seven-year bond will also yield 3.65%,” a bank spokesperson told PTI here today.

The bank had given an initial price guidance of 4% while the final pricing saw of tightening of 0.35%. The issue was oversubscribed by over 13 times to SGD 3 billion, the lead banker to the issue StanChart said.

This is the fifth debt raising by the private sector bank this fiscal with it earlier in the year raising USD 1 billion in two instalments of USD750 million and USD 250 million. The bank had also raised a 1 billion yuan bond earlier in the year apart from a 100 million Swiss franc bond.

StanChart, HSBC and ANZ were the lead managers to theissue, which was closed yesterday. >> Read More

European Central Bank President Mario Draghi will turn his attention to nursing the euro region back to economic health this week as the urgency to deploy crisis measures recedes after three years.

Draghi’s Governing Council, which sits for its first session this year on Jan. 10, will seek to extend the calm it’s instilled on markets with last year’s pledge to do anything in its power to end the crisis, economists said. While policy makers will likely keep interest rates unchanged for now, the threat of unlimited bond purchases has bought time to focus more on ending the region’s looming recession.

“Draghi’s threat is working,” Tobias Blattner, an economist at Daiwa Capital markets in London, said in an interview. “Foreign investors are gradually coming back and Spain can live with the current yield levels,” he said, referring to a 10-month low in Spanish borrowing costs.

Draghi and European policy makers are returning to work with the turmoil that has ravaged the region’s bond markets at bay. Even so, they face potential pitfalls arising from widening debt in Spain, next month’s election in Italy and continuing austerity in Greece. >> Read More

 Reserve Bank is contemplating to allow foreign institutional investors (FIIs) in currency futures market, Deputy Governor H R Khan today said.

“We are thinking whether FIIs can participate in currency futures,” Khan said while speaking at a seminar on capital markets organised by industry bodyCII here.

He said the RBI is also mulling allowing a repo incertificate of deposits (CDs) issued by banks and commercial papers (CPs) by corporates.

This move, if allowed, will help expand the corporate bond market. Normally, CDs and CPs are of short-term maturity of say, one to six months.

He said discussions to bring down “haircut” on repo or keeping it tenor based, are at an advanced stage and the RBI will come out with guidelines on the same in the next few weeks.

A haircut is a percentage that is subtracted from the market value of an asset that is being used as collateral. >> Read More

The market regulator Sebi on Wednesday said it has appointed a committee under ex-Cabinet secretary K M Chandrashekhar to frame a single set of guidelines for all types of foreign investors.

The committee will suggest ways to simplify the investment process for all overseas entities like foreign institutional investors, foreign venture capital investors (FVCIs), qualified financial/institutional investors (QFIs), and NRIs, among others, and also to strengthen surveillance over them.

“Why should we have various routes for foreign investment? Why should we have sub-accounts, ODIs, FIIs and QFIs and NRIs and all that? In consultation with government, we have decided to combine these various routes which are present today into one single route. >> Read More