'Legalise short selling' says Dubai bourse CEO

Jeff Singer says there are forms of short selling that could be Sharia compliant.
'Legalise short selling' says Dubai bourse CEO
BEAR MARKET: Jeff Singer said short selling is a way for investors to make money in a bear market in Dubai. (ITP Images)
By Damian Reilly
Mon 28 Jun 2010 12:01 PM

Jeff Singer, CEO Nasdaq Dubai, called on Gulf policy makers on Monday to allow short selling on the region's bourses.

"You can only make money in a bull market here - that needs to change. You can't short the market here. So in a bear market the institutional investors run for the hills," he told delegates at the Arabian Business Learning From Legends Conference.

"That (investors exiting the market) was what we saw in June 2008, and it was just unbelievable" he said, referring to market reaction to a Morgan Stanley report forecasting Dubai property prices would decline by between five and 10 percent.

"There has to be a way for institutional investors to make money in a bear market here. That is short selling. I know there are a number of proposals for it to happen, and I think the time is right now," he said.

Singer added he was not advocating so-called 'naked' short selling - effectively betting against the negative performance of a stock without actually holding any of that stock - which he said could never be compliant with Sharia financial practice.

There have been calls across Europe recently to ban naked short-selling.

Instead, he said, there were other forms of short selling that could be Sharia compliant and would be beneficial for Gulf markets, whose performance he described in 2010 as "negative."

He said: "They are under consideration and I believe they would satisfy the bulk of Sharia scholars."

Singer also called on Gulf authorities to ensure the various regional bourses met the criteria to see them upgraded by international authorities from "frontier" status to "emerging" market status.

"There are billions of dollars in institutional funds earmarked for investment in emerging markets," he said, adding that Gulf bourses were missing out because of their current "frontier" status.

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