Alliance & Leicester Shares

Swiss_Toni

I am at a slight loss (mentally, if not financially... ).

Northern Rock shares fell due to a panic in the retail sector not really understanding what was going on in the commercial money markets.

NR are grossly exposed to commercial lines of credit and there was a suggestion that these might dry up due to their (apparent) exposure to poor US mortgage debt.

But I am lost as to why A&L shares fell so heavily - there was no indication that the (irrational?!) fears of pensioners waiting outside branches of NR was going to happen to A&L, but the share price fell (ahem, like a rock) and has not substantially recovered?
A&Ls dividends are healthy too.

Note - I am not an A&L shareholder, just this one has me slightly bemused - and I am doing my research at the weekend in advance of a planned buy on Monday!!

Any suggestions gratefully received - the 'net doesn't offer the insight I might hope (other than it is an irrational thing?!) and I note A&L Directors buying £££ of shares at the close of business on Friday (which tends to be a sign they think it is on the up?)

Cheers!

sloth

a&l was heavily shorted (selling shares they don't own with the intention of buying them back cheaper in the future) in late monday afternoon trade principly by uk and us hedge funds trying to take advantage of the predicament surrounding northern rock. they were trying to induce a bit of panic into a&l shareholders to make them think a&l may suffer the same fate as nr (they have similar business models although i think a&l is marginally better run!)

This gave the hedge funds a decent profit as the shares dived down 33% to 600p on monday afternoon and then shot back up 27% on tuesday and a further 8% i believe on wednesday. as far as i know that is the main reason for the massive a&l price fluctuation at the beginning of the week

Swiss_Toni

Cheers

So basically aggressive specualtion?!

Looking at the current A&L price it appears to be great value?!

:j

sloth

you could argue that all banks look great value as they are all down on 6 weeks ago!! not as easy as it seems