The corporate watchdog should lift its ban on covered short-selling of financial securities as it is big losses by major banks that drive down stock prices and not short-sellers, a hedge fund association said.
"If you have an institution like Royal Bank of Scotland come out with a $60 billion loss for 2008 ... then it is a logical conclusion that many investors are selling their long holdings," Alternative Investment Management Association Australia chairman Kim Ivey said.
"And this is why we're seeing bank shares weaken, not because of short-sellers.
"ASIC continuing this ban in Australia is not actually providing any stabilisation. If sentiment is still a major concern for some people, then they may wish to consider whether nationalising the Australian banks is the next step to help soothe their fears."
Some financial planners also questioned ASIC's decision in late January to extend the ban on covered short-selling of financial securities until 6 March.
"It's a catch-22," rmg financial services partner John Donald said.
"Perhaps what ASIC are doing is delaying lifting this ban in the hope there will be a global financial recovery in the short-term ... but it's a bit of a punt I guess."
WealthPartners Financial Solutions principal Andrew Heaven said he was interested in the arguments between investors supportive of ASIC's decision and hedge funds critical of the ban.
"HFA came out with a statement saying that the performance of the markets had nothing to do with short-selling," Heaven said.
"My argument back to that is: 'That's nice but thank God ASIC did extend that ban'. Wouldn't it be interesting to see what would have happened to the markets if they did lift the ban like in the UK?"
