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The Short Report – 01 Oct 2020

Weekly Reports | Oct 01 2020

This story features UNIBAIL-RODAMCO-WESTFIELD SE, and other companies. For more info SHARE ANALYSIS: URW

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

Summary:

Week ending September 24, 2020.

Last week saw the ASX200 plunge again along with the Nasdaq before bouncing hard on (would you believe) domestic issues, specifically more state border restriction easing and the first steps towards easing in Victoria.

We might note from the table below that there’s a complete lack of widespread short positions in the current market, with just a handful of exceptions. Never before in the history of this Report have there been only two stocks shorted more than 10%, one over 9% and one over 8%. It’s only when we get down into the 5-6%-plus area do we see a bit more interest.

And in those brackets, last week’s activity mostly reflected simple shuffling around, although we do notice shopping mall landlord UR Westfield ((URW)) popping in at the bottom. The stock has been highly volatile of late on every subtle shift in the reopening theme.

Speaking of highly volatile, Mesoblast ((MSB)) has also been yo-yoing around lately as only a biotech can, on the “will it/won’t it” receive its drug approval theme. Mesoblast shorts rose to 6.0% last week from under 5%.

Conversely, but on the same “will it/won’t it” theme, the lottery that is Jumbo Interactive ((JIN)) dropped from 6.3% shorted the week before to off the 5%-plus table last week on speculation of a possible deal with WA’s Lotterywest. That deal was confirmed yesterday.

Consumer finance provider and new BNPL aspirant FlexiGroup ((FXL)) had a tough week last week share price-wise, without any new news, and shorters clearly cashed in. FlexiGroup shorts fell to 6.7% from 8.2%.

Other than that, the action was again all in the travel agent industry. See below.

Weekly short positions as a percentage of market cap:

10%+
WEB   17.7
MYR   11.0

No changes

9.0-9.9

IVC

No changes    
                                               
8.0-8.9%

ING

Out: FXL, CUV

7.0-7.9%

BOQ, CUV, GXY, FLT

In: CUV, GXY, FLT              Out: CTD

6.0-6.9%

FNP, A2M, ORE, CTD, PNV, FXL, MTS, NEA, AVH, HUB, MSB

In: FXL, CTD, NEA, MSB                Out: GXY, JIN, BIN

5.0-5.9%

BIN, Z1P, EOS, LOV, TGR, SEK, SUL, SGM, PLS, BEN, COE, URW, ALG

In: BIN, Z1P, PLS

Out: FLT, NEA, SXL, PGH, NEC

Movers & Shakers

This from last week’s Report:

“We might note Webjet ((WEB)) shorts are becoming ever more crowded, moving last week to 17.5% from 16.8%. In the battle of the travel agents, Corporate Travel Management ((CTD)) rose to 7.3% from 6.5%, while Flight Centre ((FLT)) fell to 5.8% from 6.7%.”

The scorecard this week is Webjet ticking up to 17.7%, while the other two reversed. Flight Centre shorts rose to 7.4% from 5.8% and Corporate Travel Management down to 6.7% from 7.3%.

If we want to identify yo-yoing stocks then these three win the prize. The issue for travel agents is one of domestic tourism signs becoming more positive while the resumption of international flights is looking further and further away. Each day brings new news, and more up/downs in share prices.

At home, last week saw the Wicked Witch of the North agree to expand the NSW-Queensland travel bubble, while Captain Dan lifted the Melbourne curfew. Since then, the aforementioned bubble has been further expanded, South Australia has reopened to NSW, and even WA has eased restrictions.

In the world beyond, second waves in France, Spain and the UK are running out of control, and Americans are ignoring the fact the same appears to be building there as well. The chance of Australia’s international border being reopened at all in our lifetimes is rapidly diminishing.

For listed travel agents, it comes down to which is most exposed to what – domestic or international. Shorters seem stoically determined that Webjet will need to raise more capital, again, while Corporate Travel has this week done so, but to make an acquisition, and this morning brought news of Flight Centre shutting up hundreds of its bricks & mortar stores.

It’s hard to keep up, and it’s a rare day on the ASX200 when at least one of the three does not appear on either the top five winners’ or losers’ boards.

ASX20 Short Positions (%)

Code Last Week Week Before Code Last Week Week Before
ALL 3.7 4.0 MQG 0.4 0.4
ANZ 0.9 0.9 NAB 1.3 1.2
BHP 3.9 4.0 NCM 0.3 0.3
BXB 0.2 0.2 RIO 1.3 1.4
CBA 0.7 0.6 TCL 0.6 0.7
COL 0.5 0.3 TLS 0.4 0.5
CSL 0.3 0.4 WBC 0.9 0.8
FMG 0.8 0.8 WES 0.4 0.4
GMG 0.3 0.3 WOW 0.2 0.2
IAG 0.9 0.9 WPL 1.3 1.2

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

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.

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

CTD FLT JIN MSB URW WEB

For more info SHARE ANALYSIS: CTD - CORPORATE TRAVEL MANAGEMENT LIMITED

For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED

For more info SHARE ANALYSIS: JIN - JUMBO INTERACTIVE LIMITED

For more info SHARE ANALYSIS: MSB - MESOBLAST LIMITED

For more info SHARE ANALYSIS: URW - UNIBAIL-RODAMCO-WESTFIELD SE

For more info SHARE ANALYSIS: WEB - WEBJET LIMITED