Weekly Reports | Jun 18 2020
This story features CHALLENGER LIMITED, and other companies. For more info SHARE ANALYSIS: CGF
See Guide further below (for readers with full access).
Week ending June 11, 2020
Last week saw the ASX200 run hard up through the 6000 level once more, before another pullback.
Well blow me down…
Last week I was wary of some big changes in short positions, as so often I’ve been caught out by blips in the ASIC data. Hence I was sceptical about these changes. From last week’s Report:
While three stocks fell out from the 5% bracket, Challenger ((CGF)) disappeared from 7.3%, Harvey Norman ((HVN)) from 7.2%, Flight Centre ((FLT)) from 6.6% and Alumina Ltd ((AWC)) from 6.0%. We might also add Bendigo & Adelaide Bank ((BEN)), down to 5.2% from 8.1%.
Well, looks like they were accurate. None of those stocks has returned to the table, and Bendigo & Adelaide has now fallen out altogether (while peer Bank of Queensland ((BOQ)) creeps ever higher).
So it’s true – the number and magnitude of short positions on the ASX continues to rapidly deteriorate. Last week a net three stocks fell off. Given it’s June, there may be some degree of squaring up for year’s end, or it may simply be that the market remains volatile but to date with an upside bias.
Not counting Speedcast International ((SDA)), in bankruptcy, the number of stocks shorted my 10% or more has now fallen to a mere two. Given Super Retail ((SUL)) provided an upbeat trading update this week, and the stock ran up over 10% on the day, we may see a grand total of one stock in the rarefied air next week.
Lithium miner Galaxy Resources ((GXY)) dropped to 8.4% from 10.2% last week, while peer Orocobre ((ORE)) fell to 8.3% from 9.0% and Pilbara Minerals ((PLS)) to 7.7% from 8.6%. All three rallied strongly during the week, likely due to virus issues in South America.
Then they all fell again.
The only other move of note was that of Southern Cross Media ((SXL)), which bucked the trend in jumping to 6.4% from below 5%, but given the company raised capital, it’s likely a standard arbitrage play that will soon reverse.
Weekly short positions as a percentage of market cap:
Out: JBH, CUV, NEA, ORE
CUV, NEA, JBH, GXY, ORE, PPT, BOQ PLS
In: GXY, CUV, NEA, JBH, ORE, PPT, BOQ Out: PLS
PPT, MTS, PLS
In: PLS Out: PPT, BOQ, SEK, NCZ
SEK, Z1P, PGH, LYC, NCZ, SXL, SGM, JIN, LOV
In: SEK, NCZ, SXL, JIN, LOV
CLH, NEC, MYX, HUB, BUB, CTD, LOV, CLQ
In: HUB Out: JIN, LOV, GWA, BEN, SYR, AMP
Movers & Shakers
Movers & Shakers will return when things settle down.
ASX20 Short Positions (%)
|Code||Last Week||Week Before||Code||Last Week||Week Before|
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.
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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For more info SHARE ANALYSIS: AWC - ALUMINA LIMITED
For more info SHARE ANALYSIS: BEN - BENDIGO & ADELAIDE BANK LIMITED
For more info SHARE ANALYSIS: BOQ - BANK OF QUEENSLAND LIMITED
For more info SHARE ANALYSIS: CGF - CHALLENGER LIMITED
For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED
For more info SHARE ANALYSIS: GXY - GALAXY RESOURCES LIMITED
For more info SHARE ANALYSIS: HVN - HARVEY NORMAN HOLDINGS LIMITED
For more info SHARE ANALYSIS: ORE - OROCOBRE LIMITED
For more info SHARE ANALYSIS: PLS - PILBARA MINERALS LIMITED
For more info SHARE ANALYSIS: SUL - SUPER RETAIL GROUP LIMITED
For more info SHARE ANALYSIS: SXL - SOUTHERN CROSS MEDIA GROUP LIMITED