Short-selling will be banned on the Athens bourse for two months starting Aug. 9, Greece's financial regulator said on Monday in an effort to stem a stockmarket slump.
This is the third time since the eruption of the global economic crisis in 2008 that Greece has prevented short-term bets against its stocks as the debt-laden country struggles to avoid default.
The Athens bourse index closed down 6 percent on Monday at a fresh 14-year low, a fall nearly twice as steep as that of European peers, after the U.S. credit rating downgrade late on Friday and on concerns over the impact of an upcoming bond swap on Greek banks.
"The board of the capital market commission, after considering the urgent circumstances on the Greek market, has decided to ban short selling in listed stocks on the Athens bourse," the capital market commission said.
The watchdog announced the measure after the Athens general index dropped below the psychologically important 1,000 points level. Greek PM George Papandreou has repeatedly blamed speculators for exacerbating his country's woes.
"The ban will be implemented tomorrow August 9 and for two months," the regulator said.
Greece imposed its first short-selling ban from October 2008 to June 2009. The second lasted for four months and was lifted in Sept 2010, after Greece received its first EU/IMF bailout.
Analysts said the move could help reduce volatility in a market hit hard by the debt crisis. "It was a necessary decision in a very difficult environment on the Greek stock market," said Costas Boukas, head of asset management at Beta Securities.
"This decision will help the market by separating 'real investors' from speculators that invest short-term," he said.
But other analysts were more sceptical. "These short-selling bans have never worked before," one industry source active in the alternative investment community told Reuters. "They were introduced in several jurisdictions in 2008 and invariably prices continued to fall. The situation was often made worse because liquidity was reduced," the source added.
The Athens bourse has dropped nearly 30 percent since the beginning of the year. Low stock market valuations could hurt the cash-strapped country's efforts to achieve its ambitious 50 billion euro privatisation plan to reduce its debt as part of its EU/IMF bailout.
Greece is supposed to raise a large part of this sum by selling shares in listed state companies, such as gambling monopoly OPAP or electricity utility PPC .
OPAP, which is slated for full privatisation this year, shed 8.9 percent on Monday, slashing its market value to 3.22 billion euros. PPC shed 8.1 percent, its biggest one-day drop since Sep 2008.
The Italian stock market regulator has no plans to ban short-selling, a source at the regulator said.
Several other countries such as Spain and Belgium already have a ban on so-called naked short-selling, which is the practice of short-selling a financial instrument without first borrowing the security or ensuring that it can be borrowed.