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The Short Report

Weekly Reports | Sep 28 2017

This story features IGO LIMITED, and other companies. For more info SHARE ANALYSIS: IGO

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 September 21, 2017

Last week saw the ASX200 track a choppy downward trajectory, hitting lower lows and lower highs. The close at 5652 on September 21 marked the lowest point since the April peak.

This is probably why we see quite a bit of green in the table below amongst the smattering of red, particularly towards the bottom of the table. The 5-6% bracket has much reduced in number. Market weakness has provided shorters with profit-taking opportunities.

In last week’s Report I noted:

Hospital owner Healthscope ((HSO)) is not quite a Mover & Shaker this week despite an increase to 10.4% shorted from 9.4% shorted because the stock has been rising steadily up the table for weeks, particularly since a poor earnings result, given a very challenging environment.”

Last week Healthscope shorts rose to 11.5% from 10.4%. This officially makes it a Mover & Shaker but there is nothing more to add.

Independence Group ((IGO)) has moved in to second most shorted position with a rise to 16.3% from 15.1%. It’s all about the nickel price, and uncertainty surrounding the impact Beijing’s forced closure of smelters due to environmental reasons will have.

There does not appear to have been any news emanating from IVF specialist Virtus Health ((VRT)) since the company’s result release in late August, but the stock began a rally last week that has since amounted to 6% since the prior low. Virtus shorts fell to 5.5% from 7.1% last week.

Chicken or egg? Did the rally prompt the short covering or did short-covering cause the rally?

Finally, Myer’s ((MYR)) share price has been soggy since yet another weak earnings result, delivered mid-month, up until yesterday when suspicions were raised Premier Investments ((PMV)) might be about to move from 10.8% stake to full takeover offer. Myer shares jumped 10%.

Last week Myer shorts fell to 14.3% from 15.3%. Watch this space.

Nothing more to add in Movers & Shakers this week.

Weekly short positions as a percentage of market cap:

10%+

SYR    20.3
IGO     16.3
ORE    15.7
WSA   14.9
MYR   14.3
DMP   14.0
JBH     13.9
RFG    13.8
SHV    13.5
HSO    11.5
ACX   11.3
GXY   10.7
AAD   10.3
HVN   10.1

Out: MTS                   

9.0-9.9%

APO, MTS
 
In: MTS           Out: ISD                                                                                            

8.0-8.9%

MYX, GTY, ISD, QIN, NXT, RIO

In: ISD                       

7.0-7.9%

AHG, BKL, NWS, SAR, FLT

In: NWS, SAR                        Out: VOC, TPM, VRT

6.0-6.9%

VOC, SEK, TPM, GXL, JHC, MND, NSR, IPD, SDA, BEN, AAC, TAH, NEC, PRU, HT1, BAP

In: VOC, TPM, JHC, SDA, PRU, BAP                    Out: NWS, SAR

5.0-5.9%

BWX, KAR, VRT, GMA, ING, BAL, QUB, CSR, OFX, A2M, MSB

In: VRT, BAL                       

Out: JHC, SDA, PRU, BAP, IPH, CCP, CSV, RCG, OSH, MQA, AWE, CTD, WOW

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.

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CHARTS

IGO MYR PMV

For more info SHARE ANALYSIS: IGO - IGO LIMITED

For more info SHARE ANALYSIS: MYR - MYER HOLDINGS LIMITED

For more info SHARE ANALYSIS: PMV - PREMIER INVESTMENTS LIMITED