Spanish Stocks Drop as Regulator Lifts Short-Selling Ban

Spanish stocks dropped, extending the benchmark IBEX 35 (IBEX) Index biggest-weekly selloff in four months, after the country’s market regulator lifted a six-month ban on short selling.

Banco Santander SA (SAN), the nation’s biggest bank, retreated 2.3 percent. Bankia SA (BKIA), the lender that received the largest government bailout, sank 12 percent. Fomento de Construcciones & Contratas SA led a selloff by construction companies, falling 9.1 percent. Acciona (ANA) SA plunged 13 percent.

The benchmark IBEX 35 fell 1.6 percent to 8,229.7 at the close in Madrid, extending their slide this week to 5.7 percent. The gauge had rallied 35 percent through yesterday after Spanish regulator, CNMV, imposed short-selling restrictions on July 23, citing “extreme volatility” in markets.

“The market is likely to correct in the short term after the strong run seen since last summer,” Rui Mota Guedes, an analyst at CA Cheuvreux in Paris, wrote in a report today. The removal of restrictions “is positive news for investors and the market as it should increase market liquidity.”

The yield on benchmark Spanish government bonds has fallen to 5.21 percent from 7.62 percent on July 24 as concern about the euro-region debt crisis faded and the country’s banks took steps to repair their balance sheets. Spanish lenders have been booking costs to comply with government orders to recognize losses on real estate that piled up on their balance sheets as Spain’s property boom turned to bust.

Growth Seeds

After implementing the deepest austerity measures in decades, Spain “is sowing the seeds of growth,” Economy Minister Luis de Guindos said at a discussion forum in Davos, Switzerland, last week. The country is “fully on track to grow again,” he said.

Santander slid 2.3 percent to 6.04 euros today. The shares have tumbled 7.7 percent this week, the biggest drop since July.

Bankia, which was ejected from the IBEX 35 on Jan. 2, retreated 12 percent to 45 euro cents. Bankinter SA (BKT) slipped 3.2 percent to 3.87 euros.

FCC fell 9.1 percent to 9.05 euros, extending the stock’s decline this week to 18 percent, its biggest decline since 1992. Actividades de Construccion & Servicios SA, Spain’s largest construction company, lost 2.1 percent to 17.30 euros, while Sacyr Vallehermoso SA (SYV) retreated 3.8 percent to 1.63 euros.

Acciona plunged 13 percent to 51.54 euros after Economista reported that Spain’s Industry Ministry has considered cutting further subsidies for renewable energy, citing unidentified people. Analysts at Santander downgraded the shares to underweight, the equivalent of a sell recommendation.

To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net

To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net