Short-sellers sit on $1 bln loss on European banks in April
Short-sellers who bet against European banks are set to lose a substantial amount of money in April after the sector bounced back from the shock downfall of Credit Suisse (CSGN.S) in anticipation of strong quarterly earnings.
Investors who set up bearish trades believing the sector’s stock prices would fall further have lost an estimated $1 billion so far this month, according to analytics firm Ortex, after making $2.7 billion in March, their largest profit on European bank short positions in more than a year.
The STOXX European banks share index (.SX7P) has risen as much as 18% from late March’s lows. Italy’s UniCredit (CRDI.MI) – one of the top shorted stocks according Ortex and S&P Global Market Intelligence – has rallied 35% since then to its highest since 2016.
“Rate hikes have significantly boosted interest income and that’s not going to fall right now. It is not time yet to leave the financials out of your portfolio,” said Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
Only a few weeks ago, at the peak of the banking turmoil, markets were bracing for a deep downturn and even for central banks to reverse course and start cutting interest rates.
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