Short-sellers target Portugal as Espirito Santo woes spread

miércoles 16 de julio de 2014 09:58 GYT

* Bearish bets rise as Espirito Santo scandal escalates

* Sign of more discerning tactics by investors

* Portugal Telecom most shorted stock on PSI 20 index

* Buying on dips in price may hurt short sellers

By Francesco Canepa

LONDON, July 16 (Reuters) - Short sellers are raising their bets that Portuguese stocks will fall as the escalating troubles of the Espirito Santo family send ripple effects through the country's corporate world.

The moves are a sign investors are using more discerning tactics, after a two-year rally for the euro area's periphery that has left stocks and bonds looking expensive.

Portugal's largest telecom group, Portugal Telecom, has become the most shorted stock on the Lisbon benchmark PSI 20 index, according to data-provider Markit. The group plans legal action to recover more than $1 billion owed it by the Espirito Santo family's holding company, Rioforte.

Short sellers borrow a stock they think is overvalued and sell it, betting they will be able to buy it back at a lower price before returning it to the lender. The Markit data cited the amount of shares out on loan at the end of Tuesday.   Continuación...