article 3 months old

The Short Report

Weekly Reports | May 25 2017

This story features WESTPAC BANKING CORPORATION, and other companies. For more info SHARE ANALYSIS: WBC

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

Summary:

Week ending May 18, 2017

Last week saw the ASX200 largely drop off a cliff on the back of the Great Big Bank Tax. We have since recovered some lost ground, but the banks still appear a vulnerable sector.

To that end we note shorts in Westpac ((WBC)) jumped 75% last week. To put that into context, it’s a rise to 1.4% shorted from a prior 0.8% shorted. The other big banks saw minimal movement (See Top 20 table below).

While on the Top 20, shorts in Westfield ((WFD)) apparently jumped to 2.1% from 1.1% last week. This seems a lot for a REIT when REIT short positions are usually reliably (a) minimal and (b) little changed. Westfield did provide a quarterly update last week but we’ll wait until next week to make sure this isn’t just a blip in the ASIC data.

I say that because last week this Report provided a perfectly feasible explanation as to perhaps why shorts in Estia Health ((EHE)) had fallen to 6.0% from 7.1%, yet this week they’re right back at 7.1%. This hints at a data blip.

Not likely a data blip is the ongoing rise in shorts in Flight Centre ((FLT)), as highlighted in last week’s Report. They have risen again, to 11.1% from 10.4%.

Over the prior two weeks both Metcash ((MTS)) and Ardent Leisure ((AAD)) fell out of the 10% plus shorted table. They’re both back in again this week.

Falling out of the 10% table last week was Quintis ((QIN)), with shorts falling to 8.2% from 10.1% on profit-taking before the company’s self-imposed trading halt last week to reassess its future.

All of the above stocks have been covered in recent Reports. While there is a lot of red and green on the table below, it’s all minimal bracket creep. The one exception is Galaxy Resources ((GXY)), which after a brief return has dropped out of the 5% table once more from 6.3%.

Beyond that, there are no fresh Movers & Shakers this week.
 

Weekly short positions as a percentage of market cap:

10%+

ORE    21.9
WSA   17.6
SYR    17.4
VOC   16.0
ACX   13.6
MYR   13.3
MYX   13.0
IGO     12.7
BAL    12.2
FLT     11.1
ISD     11.0
DMP   10.7
AAD   10.3
MTS    10.1
NEC    10.0

In: AAD, MTS            Out: QIN       

9.0-9.9%

HVN, JBH, RFG
 
In: JBH, RFG             Out: AAD, MTS                                                        

8.0-8.9%

JHC, OFX, SAR, QIN, SHV

In: QIN, SAR, SHV               Out: RFG, PRU

7.0-7.9%

MND, PRU, GTY, A2M, BKL, RWC, NWS, CTD, EHE, IPD

In: PRU, CTD, EHE, IPD                  Out: SAR, SHV

6.0-6.9%

TPM, BDR, IFL, SEK, NXT, SGH, CSV, MYO, HSO, BEN, MTR, RIO, BGA

In: RIO                       Out: IPD, CTD, EHE, GXY, PDN, WOR

5.0-5.9%

AWC, PDN, KAR, AAC, OSH, PLS, GXL, VRT, WOR, SUL, MSB, CCP

In: PDN, WOR, SUL             Out: RIO, ILU

Movers and Shakers

See above.

 
ASX20 Short Positions (%)

To see the full Short Report, please go to this link

IMPORTANT INFORMATION ABOUT THIS REPORT

The above information is sourced from daily reports published by the Australian Investment & Securities Commission (ASIC) and is provided by FNArena unqualified as a service to subscribers. FNArena would like to make it very clear that immediate assumptions cannot be drawn from the numbers alone.

It is wrong to assume that short percentages published by ASIC simply imply negative market positions held by fund managers or others looking to profit from a fall in respective share prices. While all or part of certain short percentages may indeed imply such, there are also a myriad of other reasons why a short position might be held which does not render that position "naked" given offsetting positions held elsewhere. Whatever balance of percentages truly is a "short" position would suggest there are negative views on a stock held by some in the market and also would suggest that were the news flow on that stock to turn suddenly positive, "short covering" may spark a short, sharp rally in that share price. However short positions held as an offset against another position may prove merely benign.

Often large short positions can be attributable to a listed hybrid security on the same stock where traders look to "strip out" the option value of the hybrid with offsetting listed option and stock positions. Short positions may form part of a short stock portfolio offsetting a long share price index (SPI) futures portfolio – a popular trade which seeks to exploit windows of opportunity when the SPI price trades at an overextended discount to fair value. Short positions may be held as a hedge by a broking house providing dividend reinvestment plan (DRP) underwriting services or other similar services. Short positions will occasionally need to be adopted by market makers in listed equity exchange traded fund products (EFT). All of the above are just some of the reasons why a short position may be held in a stock but can be considered benign in share price direction terms due to offsets.

Market makers in stock and stock index options will also hedge their portfolios using short positions where necessary. These delta hedges often form the other side of a client's long stock-long put option protection trade, or perhaps long stock-short call option ("buy-write") position. In a clear example of how published short percentages can be misleading, an options market maker may hold a short position below the implied delta hedge level and that actually implies a "long" position in that stock.

Another popular trading strategy is that of "pairs trading" in which one stock is held short against a long position in another stock. Such positions look to exploit perceived imbalances in the valuations of two stocks and imply a "net neutral" market position.

Aside from all the above reasons as to why it would be a potential misconception to draw simply conclusions on short percentages, there are even wider issues to consider. ASIC itself will admit that short position data is not an exact science given the onus on market participants to declare to their broker when positions truly are "short". Without any suggestion of deceit, there are always participants who are ignorant of the regulations. Discrepancies can also arise when short positions are held by a large investment banking operation offering multiple stock market services as well as proprietary trading activities. Such activity can introduce the possibility of either non-counting or double-counting when custodians are involved and beneficial ownership issues become unclear.

Finally, a simple fact is that the Australian Securities Exchange also keeps its own register of short positions. The figures provided by ASIC and by the ASX at any point do not necessarily correlate.

FNArena has offered this qualified explanation of the vagaries of short stock positions as a warning to subscribers not to jump to any conclusions or to make investment decisions based solely on these unqualified numbers. FNArena strongly suggests investors seek advice from their stock broker or financial adviser before acting upon any of the information provided herein.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

EHE FLT MTS WBC

For more info SHARE ANALYSIS: EHE - ESTIA HEALTH LIMITED

For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED

For more info SHARE ANALYSIS: MTS - METCASH LIMITED

For more info SHARE ANALYSIS: WBC - WESTPAC BANKING CORPORATION