Wednesday, June 2, 2010

SHORT SELLING


As posted by Dr. Mahathir Mohamad at Che Det on June 1, 2010 3:55 PM

1. Some people in Malaysia particularly those involved with the stock markets seem keen to legalise what is called "short selling". Basically short selling is about selling shares or currencies or other assets that the seller does not have with the expectation that the sale would push the prices down. Once the price is down the seller would then buy to deliver to the earlier buyers he had sold to at a higher price.

2. Short selling is not speculation. It is manipulation of the market with almost certain success to be had. Other investors or buyers would lose money as they would be left holding the devalued shares or money or whatever.

3. Malaysia had banned short selling in the past. We regarded it as unfair and damaging to genuine investors.

4. I read in the Financial Times of 24th May that "Europe plans ban on naked short selling". Angela Merkel, the German Chancellor has unilaterally banned "naked shorting of Eurozone sovereign debt instruments and shares of 10 German banks". This has caused a "financial turmoil" meaning the short sellers are unhappy that they cannot manipulate the market anymore. Merkel asked how people can sell something they don't have.

5. The Europeans and the Americans are still hoping to keep all the "financial products" which they must know are what precipitated the current crisis. They are still refusing to review, modify or discard the monetary, banking and financial systems that they had devised and which they abused in order to get rich quick.

6. If we in Malaysia or other developing countries were to have this state of mind, then they would say that we are in a state of denial. And some locals will also echo their words.

7. I have no say in the Government but I think Governments should take note that not copying the West is not a sure recipe for failure.

8. In fact we should not consult Western people in the running of our country. They don't know our situation and their advice would not be good for us.

9. And we should note that even when they know a lot about the affairs of their own countries, they often bungle things. It is they who messed up the world's finances.

10. We are not always right of course. But I think we know our situation better than foreign consultants. We know our situation and the character of our prople. What may be good for the West may not necessarily be goof for us. Besides we know now that the very developed west can make very many horrible mistakes.

11. I will leave it at that.