The Short Report

Array
(
    [0] => Array
        (
            [0] => ((ASL))
            [1] => ((DJS))
            [2] => ((MSB))
            [3] => ((SGT))
            [4] => ((OZL))
            [5] => ((CFX))
            [6] => ((FGE))
            [7] => ((NWS))
            [8] => ((KCN))
            [9] => ((MSB))
        )

    [1] => Array
        (
            [0] => ASL
            [1] => DJS
            [2] => MSB
            [3] => SGT
            [4] => OZL
            [5] => CFX
            [6] => FGE
            [7] => NWS
            [8] => KCN
            [9] => MSB
        )

)

This story features ANDEAN SILVER LIMITED, and other companies.
For more info SHARE ANALYSIS: ASL
The company is included in ALL-ORDS

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly and monthly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX).

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.

Summary:

Period: Week to, and month to, January 16, 2013.

It's becoming a little tedious, but the top of the most shorted table is still dominated by News Corp-related share variations which are soon to be consolidated, as well as a now familiar EFT. We can ignore these. Among the real stocks, last week saw very little movement in short positions and little change to report in the Top 20, other than Ausdrill ((ASL)) has snuck in at number 20 to replace David Jones ((DJS)). There were no surprises, with biotech Mesoblast seeing some short reduction along with OZ Minerals, which posted a strong production report. Monthly numbers reflect the recent action on Forge Group and the big drop in the previous week in Kingsgate shorts.

There were actually no weekly short increases of one percentage point or more as we head towards result season, and only four decreases. Similarly, two monthly increases of two percentage points or more met two decreases. Note that FNArena arbitrarily chooses these criteria as being sufficiently significant to justify a note.
 

Weekly Short Increases

There were no weekly short increases of one percentage point or more.

Weekly Short Decreases

Shorts in Mesoblast ((MSB)) decreased to 2.82% from 6.01%

The shares of this speculative biotech fell over the period in question, suggesting profits were taken on a short position.

Shorts in Singapore Telecom ((SGT)) decreased to 2.64% from 4.35%

SingTel shorts seem to rise and fall frequently without ever becoming substantial, and usually without obvious reason. A pairs trade with Telstra perhaps? Whatever the case, SGT shorts fell last week despite little share price movement.

Shorts in OZ Minerals ((OZL)) decreased to 6.02% from 7.42%

Back in December OZ issued a production downgrade, sparking a share price fall and increased short interest. At the time, brokers thought the downgrade seemed rather extreme. Sure enough, OZ’s quarterly numbers released last week were well above guidance and hence the stock shot up, and rather stuffed up the shorters.

Shorts in CFS Retail Property ((CFX)) decreased to 2.00% from 3.36%

CFS shares have been steadily rising since late last year when the fund announced intended internalisation of management. That said, REITs also offer up straightforward pairs trade opportunities, between funds or across property sectors.

Monthly Short Increases

Shorts in Forge Group ((FGE)) increased to 4.95% from 0.76%

This increase represents the tail-end of the response to Forge’s catastrophic write-downs which saw the company almost implode, albeit short positions had been higher earlier in the month.

Shorts in News Corp ((NWS)) increased to 16.69% from 14.60%

News continues to feature on the shorts list as a function of demerger and share consolidation processes.

Monthly Short Decreases

Shorts in Kingsgate Consolidated ((KCN)) decreased to 4.71% from 14.71%

The bulk of this monthly fall occurred the week before, and suggests a big shorter had decided to ditch a trade likely aimed at expected overwhelming funding issues in a weak gold price environment. The gold price has steadied and KCN has since issued a reasonably positive production report, although funding is still a concern.

Shorts in Mesoblast ((MSB)) decreased to 2.82% from 6.07%

See above.
 

Top 20 Largest 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.

Technical limitations

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