By Kamal Ahmed Published: 9:52PM GMT 06 Mar 2010  New figures compiled this weekend by Data Explorers reveal that short selling on Prudential stock rose by 55pc on the day the deal was announced. The insurance company's share price fell by 20pc during the first 48 hours after the bid was revealed before rising to close at 520p on Friday, nearly 14pc down on the week.  "I think we might expect some share price volatility but because of the economic logic of the transaction we don't expect to see significant downside," Mr McGrath said.  "It will move about a bit but, as our institutional shareholders get more comfortable with the proposition, you will see things stabilise."  This week Mr McGrath and the Prudential's chief executive, Tidjane Thiam, will make a concerted effort to persuade UK investors that the bid is right for the company.  Mr Thiam will meet Prudential's top 30 investors over the next few days to allay concerns that the bid over-values the Asian insurance arm of AIG, the US insurance giant.  Mr McGrath said he "wasn't surprised" by the fall in the Prudential's share price: "We expected to see a price reaction given the nature of what was announced and the size." He also revealed that Prudential was not seeking to sell any of its assets and was committed to both its UK and Indian businesses.  The Sunday Telegraph revealed last week that Clive Cowdery, the insurance entrepreneur, had drawn up plans to buy the Prudential's life business and had held exploratory talks.  "We do not need to sell the UK business or any other business in order to do this transaction," Mr McGrath said. "The UK remains a very important part of the group, we have 7m customers here in the UK. It is an important source of capital and cash and a key part of the group."  Mr McGrath said that the huge growth potential in the Asian insurance market meant that Prudential had offered the right amount for such a valuable asset.  "The market has a lot of cash that needs to be put to work," he said. "This is not a bail out. We're not raising capital because we have a problem. What we are doing is affording investors an opportunity to participate in a growth story over the medium term.  "Yes, it is bold and it is large but it has been very carefully considered. We know this business very well in Asia."  Presentations to investors will include details of $340m of synergy savings.  "What is interesting with the fit with AIA is that in many of these territories where we are in the lead they don't have a very large business and vice versa," Mr McGrath said.  "So don't think about this as a merger of equals, of two businesses of similar size in each of these countries. Where we are strong they are less so, for example in Thailand AIA are by far the market leader, whereas we are fairly small. So you can see that putting those businesses together is a relatively straightforward proposition. The reverse would be true in Indonesia, where we are number one."  Mr McGrath denied that the $21bn rights issue would dilute shareholders' positions.  "This is structured as a rights issue, this is not dilutive to our existing shareholders provided they take up the rights," he said. "There's been some things written that it is wildly dilutive, well it isn't, as long as shareholders take up their rights."
The chairman of the Prudential, Harvey McGrath, has said that the insurance    giant is braced for a period of share- price volatility as investors take    short positions during the planned $35.5bn bid for AIA.