Short-selling targets Macquarie Group (mqg.ASX:Quote,News) and Babcock and Brown (bnb.ASX:Quote,News) bounced strongly when trading resumed today as market participants sought to unwind short positions and bought up stock.
At 11.42am (AEST) Babcock and Brown was up 72.33 per cent, or 57.5 cents, at $1.37, after peaking at $1.80.
Australia's largest investment bank Macquarie staged a 9.6 per cent rally, pushing its share price up $3.50 to $39.40.
Fortescue Metals Group (fmg.ASX:Quote,News), which earlier this month about 10 per cent of its stock had been the subject of stock loans, rose 26.32 per cent, or $1.50, to $7.20.
Shopping centre operator Centro Properties Group (cnp.ASX:Quote,News) jumped 43.33 per cent, or 2.6 cents, to 8.6 cents.
The rally came after the Australian Securities and Investments Commission (ASIC) over the weekend widened a ban on "naked" short selling, announced on Friday, to include "covered" transactions.
The ban is expected to remain for at least 30 days, after which ASIC will decided whether or not it to readmit covered short selling for non-financial stocks.
The start of trading today had been delayed for an hour while the Australian Securities Exchange sought to clarify if ASIC's ban affected existing hedged positions taken prior to September 22 - it won't.
Shaw Stockbroking head trader Jamie Spiteri said the delay of the start of trading to 11am had caused traders to scramble, pushing the key indices up by more than 2.5 per cent.
"It's an extremely unique time from not only what's taken place in the last 12 months but also what's taken place in the last week or two and then on top of that the (ASIC) regulatory decision that's been handed down over the weekend," he said.
"It certainly puts a different complexion on the market.
"It's caused a certain amount of scrambling early and now we're finding the market is settling down to a degree.
"But there's still a certain amount of unwinding that needs to take place."
By 12.16pm, the market had made further gains and was up about 4 per cent.
The majority of the morning rally was driven by short covering of stock, CMC Markets senior dealer Dominic Vaughan said.
"On liquidity, it's too early to say - we won't know until the end of the week," he said.
Washington Report: What if Fannie and Freddie Need Capital Infusions?
ASIC says short-selling already restricted
Share market rebounds on US rally
