Weekly Reports | Oct 21 2021
This story features FLIGHT CENTRE TRAVEL GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: FLT
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By Greg Peel
Week Ending October 14, 2021.
Last week saw the ASX200 maintain a choppy but gradual recovery before picking up the pace this week.
The most notable aspect of last week is that there is currently no stock shorted on the ASX by 10% or more, with Flight Centre ((FLT)) dropping to 9.8% from 10.4%. This is rare, but not unprecedented. Following a weak quarterly update from the travel agent yesterday, next week’s Report might be different.
Also notable is a fall in AMA Group ((AMA)) shorts back to 5.8% from 7.1%. Last week I suggested the smash repairer should be a beneficiary of cars back on the road post-lockdowns, so it seemed strange that shorts had ticked up from 6.8% the week before.
Then there’s the sudden arrival of Kirkland Lake Gold ((KLA)) at 8.2% shorted from below 5% previously. However, we’ve seen this movie before (see below).
We might also note a2 Milk’s ((A2M)) share price continues to rise, with the stock now generating possible takeover chatter. The shorts are rising as well, albeit by a fraction.
Renewed fears over what the Central Bank of Ireland will do with EML Payments’ ((EML)) Irish subsidiary has that stock appearing at the bottom of the table.
Weekly short positions as a percentage of market cap:
FLT, RBL, WEB, KGN
In: FLT, RBL
MSB, EOS, Z1P, ING, KLA
In: KLA Out: RBL
TPW, BHP, MTS, PNV, A2M
In: PNV, A2M
AMA, OBL, MND, EML
In: MND, EML Out: PNV, A2M, BGL
Movers & Shakers
Kirkland Lake Gold is a Canadian-based miner listed in all of Canada, the US and Australia. This alone offers up an opportunity for cross-border share price arbitrage (currency risk notwithstanding), hence we have in the past seen Kirkland right up there on the shorted table for a period, before disappearing again.
This time, however, the shorts no doubt reflect Kirkland’s announced “merger of equals” (scrip swapped on an equivalent dollar value basis) with compatriot Agnico Eagle Mines, which is listed in Canada and the US but not here, and which will retain the naming rights.
“The merger will establish the new Agnico Eagle as the gold industry’s highest-quality senior producer, with the lowest unit costs, highest margins, most favourable risk profile and industry-leading best practices in key areas of environmental, social and governance (ESG),” Agnico said.
As owners of Afterpay will know, once a scrip-swap ratio is established, the value of of that deal will continue to move around until the merger/takeover is completed. Kirkland shorters are likely long Agnico on the other side.
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: A2M - A2 MILK COMPANY LIMITED
For more info SHARE ANALYSIS: AMA - AMA GROUP LIMITED
For more info SHARE ANALYSIS: EML - EML PAYMENTS LIMITED
For more info SHARE ANALYSIS: FLT - FLIGHT CENTRE TRAVEL GROUP LIMITED
For more info SHARE ANALYSIS: KLA - KIRKLAND LAKE GOLD LIMITED