March 16, 2020 / 3:40 AM / 16 days ago

UPDATE 1-Australian pension fund suspends stock lending as markets slump

(Adds details about the fund and CIO comments)

March 16 (Reuters) - Australian pension fund UniSuper said on Monday it would suspend its stock lending programme indefinitely and recall all shares currently out on loan, as global markets plunge on worries about the economic fallout from the coronavirus pandemic.

UniSuper, a A$85 billion($53 billion)superannuation fund for the higher education and research sector, said that while short-selling contributed to market efficiency in a normally functioning market, this was not such a time.

“We are now in a market gripped by panic and we believe that restricting the ability to short-sell is in the best interest of promoting a more orderly market,” UniSuper’s Chief Investment Officer John Pearce said in a statement.

“We are only one fund and the efficacy of our actions will depend on how many other funds follow a similar path. Of course, we are not privy to the thinking of other funds who lend their stock,” he added.

As fears mounted about the rapid escalation in the spread of the coronavirus worldwide and its impact on the global economy, Australia’s benchmark stock exchange tumbled 7% by mid-afternoon. It has lost about 23.5% this year.

Short-sellers borrow shares and immediately sell them, betting the price will fall before they buy back the shares and return them to the lender, pocketing the margin. ($1 = 1.6268 Australian dollars) (Reporting by Rushil Dutta in Bengaluru; Editing by Kim Coghill and Edwina Gibbs)

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