Short selling sees biggest increase since 2006

The number of shares out on loan in September has risen by the highest level in five years as investors reacted to market falls by taking more negative bets.

Borrowed shares rose to 11.6% of total stock in September, according to data compiled for Bloomberg by research company Data Explorers, up from 9.5% in July. The increase is the largest seen since at least 2006.

Around 4.1% of shares on the New York Stock Exchange were borrowed and sold in September, up from 3.5% at the end of July, according to the Bloomberg figures.

The increase is the fastest since March 2009, when sentiment began to turn and shares began an ascent which saw the S&P 500 end the year 63% higher.

Bets on further falls in Hong Kong stocks - which have already tumbled - have risen to the highest level since January 2008, meanwhile, as investors grow concerned over the prospect of a slowing growth rate in China.

Short-sellers would likely have benefited from further falls in September, the final month in a quarter which ended with European indices down 25% from Q2. The FTSE 100 endured its worst quarter for 9 years, while US indices also fell sharply.

Since then, however, markets have rallied, with the S&P 500 having already risen 10% from its lows in early October.