Bankoh stock tumbles 22.5%
Bank of Hawaii
lost nearly a quarter of the value of its stock yesterday as local bank stocks plunged, three days after the market rallied following news of a federal government bailout of bad debt estimated at an unprecedented $700 billion.
The bank's stock fell by $15.76, or 22.5 percent, to $54.24. The stock closed at $70 on Friday, with a two-day gain of 28 percent, or $15.30. Bankoh Chief Executive Al Landon was unavailable for comment.
Central Pacific Bank, which posted the highest two-day gain on Friday at nearly 50 percent, or $6.81, to $20.75, saw its stock fall nearly 14 percent yesterday, or $2.90, to $17.85, directly attributable to a U.S. Securities and Exchange Commission ban on short sales - a trading method that bets the value of a stock will decline, said David Morimoto, Central Pacific's senior vice president and treasurer.
"On Thursday and Friday most financial company stocks traded up to values higher than their fundamentals warrant," he said yesterday. "It's a supply-demand imbalance. Prices will trade to levels not justified. Today is a reversion back to the norm."
In traditional short selling, a seller would borrow shares and sell them to someone else, betting that the stock will go down so that the seller can repurchase them at a lower price, repay the borrowed shares and pocket the remaining profit.
A short seller loses more money every time stocks go up. As a result, the market rally late last week was primarily due to a flood of short sellers unwilling to risk stocks rising further, a San Francisco analyst with Keefe, Bruyette & Woods told the Star-Bulletin on Friday.
Reversal of Fortune
Hawaii bank stocks sold off yesterday after a two-day run-up Thursday and Friday following an announcement by the Bush administration that it was planning a $700 billion bailout of bad mortgages and other debt of U.S. financial firms.
||2-day % gain
|Bank of Hawaii
* Numbers reflect results from its publicly traded parent company, Paris-based BNP Paribas SA
** Owns American Savings Bank