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The Short Report

Weekly Reports | Feb 08 2018

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 February 1, 2018

Last week saw the ASX200 push up through 6100 en route to retest the previous before…well…we all know what happened next. As this Report follows the week ending Thursday, the table below reflects short positions in place before the big market sell-off early this week.

Next week’s will be an interesting Report, but for now, we see minimal movement in short positions in the table as one might expect ahead of results season kicking into gear.

Alas, I must apologise for highlighting a drop in shorts last week for Domino’s Pizza ((DMP)). The stock did enjoy a 10% rally as noted, which would explain a three percentage point drop in shorts, but last week Domino’s shorts bounced straight back to where they were, at 16.7%, suggesting it was all just another blip in the ASIC data.

And, I’m afraid, ditto on TPG Telecom ((TPG)). Its shorts fell to 5.5% from 7.1% and as of last week were right back at 7.1% again. It’s a frustrating business.

So it is not without trepidation that I highlight last week’s major mover, being Tassal Group ((TGR)), whose shorts have jumped to 8.0% from 5.9%.

See below.

Weekly short positions as a percentage of market cap:

10%+

SYR    21.4
IGO     16.7
DMP   16.7
HSO    13.9
JBH     13.8
RFG    12.9
GXL    10.7
HT1     10.6

In: GXL                     

9.0-9.9

MYX, GXY, FLT, VOC, APO, AAD, NWS
 
In: NWS          Out: GXL, MYR                                                                               

8.0-8.9%

AAC, MYR, HVN, MTS, TGR, ORE

In: MYR, TGR, ORE             Out: NWS, NXT

7.0-7.9%

NXT, PLS, BAP, SHV, WSA, TPM

In: NXT, TPM                        Out: ORE

6.0-6.9%

GTY, GMA, AHG, BEN, ISD, NAN, WEB

In: NAN                      Out: JHC

5.0-5.9%

KAR, JHC, IMF, SEK, CSR, QUB, RIO

In: JHC, SEK              Out: TGR, TPM, NAN

                       
Movers and Shakers

On the assumption this is not just another blip in the ASIC data, having appeared in the bottom of the 5% plus shorted table a couple of weeks ago, salmon farmer Tassal Group has now leapt up to 8.0% shorted.

Tassal’s share price started tanking in early November as ongoing falls in salmon export prices took their toll. Noting prices had fallen -32% since May, Ord Minnett downgraded its rating on Tassal to Lighten from Buy in early December.

The stock did stage somewhat of a comeback as the general market struggled its way upward in January, but this week’s market carnage has put paid to that. There has been no news out of the company of late – no profit warning – so maybe the shorters are assuming a weak earnings result later this month.

 

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

DMP TGR