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The Short Report – 07 Nov 2019

Weekly Reports | Nov 07 2019

See Guide further below (for readers with full access).


Week ending October 31, 2019

Last week saw the ASX200 close about where it had begun, after a rally and return in between. All to do with trade optimism/pessimism.

There’s quite a lot of movement evident in the table below but most if it is bracket creep, but for some exceptions.

I have covered the progress shorts in Kirkland Lake Gold ((KLA)) in the past two Reports so I’ll simply note Kirkland shorts fell further last week to 7.0% from 10.1%.

Beyond that, there were three big short increases of note.

One is Costa Group ((CGC)) and another Bega Cheese ((BGA)) for similar reasons, while Webjet ((WEB)) shorts continue to rise.

See below.

Also I suggested last week we should see evidence of short covering in the lithium miners this week, but I was actually a day early. The short-covering scramble began last Friday. We await next week’s Report.

Weekly short positions as a percentage of market cap:

SYR    17.8
GXY   16.5
ORE    14.4
ING     13.8
GWA  13.8
NXT    13.0
BOQ   12.8
JBH     12.2
SDA    11.1
DMP   10.5
HUB   10.4
BIN     10.3
BGA   10.2
WEB   10.0
CGC    10.0
BKL    10.0
NEA    10.0

In: BGA, WEB, CGC                        Out: KLA



Out: BKL


In: BAL          Out: BGA, CGC, WEB, DCN, BWX, IFL



In: KLA, BWX, DCN, IFL, SLR, NCZ, PLS                       Out: BAL, SGM



In: SGM                      Out: NCZ, SLR, PLS



In: FMG                      Out: ADH, GEM, GMA, KAR, SEK

Movers & Shakers

This from last week’s Report:

“One stock to note ahead of next week’s Report is Costa Group ((CGC)). Last week Costa shorts fell to 8.6% from 9.1% ahead of this week’s profit warning and announcement of a heavily discounted capital raising, which saw the stock drop -28%. Someone went a little early there.”

Costa Group shorts last week increased to 10.0% from 8.6%, suggesting the shorters eschewed an opportunity to take profits, rather drooling for more.

A similar story has played out for fellow staple Bega Cheese. The company issued a profit warning last week amidst fierce competition in the dairy business and the stock promptly fell -20%. Shorts rose to 10.1% from 8.5%. See above.

There’s been no new news out of travel agent Webjet lately but the share price has been recovering from early October after succumbing to the demise of Thomas Cook Travel, which went down owing Webjet money while at the same time removing that source of ongoing revenue.

Brokers de-rated the stock accordingly but have remained circumspect, expecting said recovery. The shorters have nevertheless taken the opportunity to further build positions, with shorts rising to 10.0% last week from 8.5%.? 

ASX20 Short Positions (%)

Code Last Week Week Before Code Last Week Week Before
AMC 0.6 0.7 RIO 4.4 4.4
ANZ 0.7 0.6 S32 1.4 1.4
BHP 3.4 3.3 SCG 0.3 0.4
BXB 0.2 0.3 SUN 0.5 0.5
CBA 0.7 0.7 TCL 0.5 0.3
CSL 0.1 0.1 TLS 0.2 0.2
GMG 0.1 0.2 WBC 0.8 0.8
IAG 0.6 0.5 WES 0.6 0.6
MQG 0.3 0.3 WOW 0.9 0.9
NAB 0.7 0.6 WPL 1.0 1.0

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


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.


ASX20 Short Positions (%)

Code Last Week Week Before Code Last Week Week Before
AMC 0.6 0.7 RIO 4.4 4.4
ANZ 0.7 0.6 S32 1.4 1.4
BHP 3.4 3.3 SCG 0.3 0.4
BXB 0.2 0.3 SUN 0.5 0.5
CBA 0.7 0.7 TCL 0.5 0.3
CSL 0.1 0.1 TLS 0.2 0.2
GMG 0.1 0.2 WBC 0.8 0.8
IAG 0.6 0.5 WES 0.6 0.6
MQG 0.3 0.3 WOW 0.9 0.9
NAB 0.7 0.6 WPL 1.0 1.0

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


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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