The Short Report

This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: FLT

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 December 7, 2017

Last week saw the ASX200 bang its head up against 6000 before falling back to around 5940 as Wall Street took a brief breather. This week has seen the reverse, and a tentative sneak past 6000.

It is becoming apparent short-players in the market are now in the process of winding down ahead of a summer break. You wouldn’t want to be lying on a beach oblivious if, say, someone made a takeover bid for Westfield ((WFD)).

Sorry, what?

On that note, last week had Westfield 4.5% shorted (see table below) ahead of this week’s takeover announcement and 13% share price pop out of suspension. With brokers not ruling out a counter-bid, it will be interesting to see who Westfield shorts look in next week’s Report.

It is also quite likely shorters are a little nervous about the Republicans actually managing to get a tax bill through before Christmas, as they suggest they can. This might spark a Wall Street surge and a sympathetic break-out locally. Or it might be a case of “sell the fact”, but it’s a risky bet to make.

Whatever the case, all we see below is a sea of green and yet another reduction in the total number of ASX-listed stocks shorted by 5% or more. Not only is the table one of the shortest I’ve experienced, I believe the actual 5-6% bracket currently holds fewer stocks than I can ever recall.

Despite a lot of movement, no move either way exceeded one percentage point. Coming close was Flight Centre ((FLT)), which has reappeared in the 10% plus club after a brief absence. Flight Centre began a bit of a rally last week bit clearly the shorters aren’t buying it, pardon the pun, and shorts have risen to 10.0% from 9.1%.

Last week I said this:

“I could make a big deal out of the fact that for the first time in a very long time, Myer ((MYR)) has slipped out of the 10% plus shorted club. But as it’s only to 9.7%, there’s no point in looking for a trend at this stage.”

Last week Myer shorts fell to 8.8%. Maybe there is a trend.

And I also said this:

“I could also note that Woolworths ((WOW)) is back into the 5% plus table after a period of absence, to be the only other ASX Top 20 company alongside Rio Tinto to be shorted to such an extent, but as it’s a move to 5.0% from 4.8% shorted, I won’t.”

Just as well I didn’t. Woolworths has fallen back to 4.9% shorted.

So once again, no Movers & Shakers this week as the year winds down.

Next week’s Short Report will be the last for 2017 before returning in January.

Weekly short positions as a percentage of market cap:

10%+

SYR    21.0
IGO     18.8
DMP   16.7
JBH     15.5
HSO    14.7
RFG    11.9
AAD   11.1
WSA   10.2
FLT     10.0

In: FLT            Out: ACX, MTS, APO                      

9.0-9.9

ACX, APO, HVN, VOC, MTS
 
In: ACX, APO            , MTS              Out: FLT, MYR, HT1, JHC                                                              

8.0-8.9%

HT1, NWS, ORE, MYR, JHC, QIN

In: HT1, MYR, JHC  

7.0-7.9%

GXY, MYX, GXL, TPM, AAC, NXT

Out: NSR, RIO, SHV, GTY

6.0-6.9%

MYO, SHV, RIO, NSR, GTY, BAP, AHG, BEN, TAH, ISD, SEK

In: SHV, RIO, NSR, GTY, TAH, SEK                     Out: KAR

5.0-5.9%

KAR, GMA, CSR, PRU, QUB, ABC

In: KAR                                  Out: TAH, SEK, IPD, MND, SUL, 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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