The Short Report

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            [1] => ((ACR))
            [2] => ((ALQ))
            [3] => ((JBH))
            [4] => ((SGT))
            [5] => ((ACR))
            [6] => ((ALQ))
            [7] => ((JBH))
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            [0] => SGT
            [1] => ACR
            [2] => ALQ
            [3] => JBH
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            [5] => ACR
            [6] => ALQ
            [7] => JBH
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)

This story features ACRUX LIMITED, and other companies.
For more info SHARE ANALYSIS: ACR

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.

Summary:

Week ending June 12, 2014

Last week saw the ASX 200 fall further away from its highs above 5500 towards the hard-working 5400 level as iron ore prices continued to fall, a queue of local retailers bemoaned the budget blues with profit warnings, and ISIL invaded Iraq. Outside of short percentage bracket creep in either direction, significant moves last week were short increases while short decreases of in excess of one percentage point were restricted to stocks with only small short positions to begin with.

Singapore Telecom ((SGT)), Acrux ((ACR)) and ALS ((ALQ)) were among those attracting short increases of 1ppt or more while special mention also goes to perennial top-ten shorted retailer JB Hi-Fi ((JBH)). See Moves and Shakers (below).
 

Weekly short positions as a percentage of market cap:

10%+

COH   18.3
MND   13.1
ACR    12.2
JBH     11.8
UGL    11.2
SGT     11.1
TRS     11.1
MTS    10.9
MYR   10.3
NWS   10.2
PDN    10.1
ALQ    10.0

In: SGT, ALQ

9.00-9.99%

AGO, MTU, BLY,

In: AGO          Out: SGT, ILU          

8.00-8.99%

ASL, ILU

In: ILU            Out: ALQ, AGO, TSE         

7.00-7.99%

NXT, CAB, TSE, BKN, WSA, WHC, MSB

In: TSE

6.00-6.99%

DSH, FLT, SCP, TEN, SGM

In: SGM          Out: NUF

5.00-5.99%

MIN, NUF, BRU, RRL, HVN, VET, OZL, HZN, FMG, LYC, NWH, KAR, SLR,

In:  NUF, LYC, NWH, SLR      Out: SGM, TWE, DSL
 

Movers and Shakers

Singapore Telecom ((SGT)) is pretty much a permanent member of the most-shorted club but this is likely to reflect a popular pairs trade against That Other Telco rather than anything particularly specific to SingTel. However last week SingTel did announce the acquisition of two digital advertising companies. As to whether this news influenced shorting activity is unclear, but SingTel shorts increased last week by 1.6ppt to 11.1% from 9.5% to lift the stock into the elite 10% plus cohort, for now.

Acrux ((ACR)) has quartered in value over twelve months following an announcement from the US FDA it was looking into the adverse effects of testosterone therapies, thus throwing the future of Acrux’ primary Axiron product into doubt. Last week the stock nevertheless fell into an upward hole as traders speculated on the company’s ability to ride out the resultant sales decline. A 25% rally fed on itself. This sparked the attention of shorters nonetheless, with shorts rising 1.5ppt to 12.2% from 10.6%.

ALS ((ALQ)) disappointed with its earnings result release last month which highlighted ongoing tough conditions in the minerals testing business. Yet ALS was another stock to enjoy a spike up in price last week, despite one broker – Deutsche Bank – downgrading to Sell, to join four other Sell ratings in the FNArena broker database. The shorters moved in, hence ALS has just snuck into double digits this week at 10.0% on a 1.5ppt rise from 8.5%.

We’ll make special mention of JB Hi-Fi ((JBH)) this week – a near perennial member of the 10% plus shorted club – given a 0.9ppt increase in shorts to 11.8%. As to why hedge funds insist on shorting this consistent over-achiever, to their continuous detriment, is unclear, but a share price jump for the stock last week when all about consumer discretionary stocks were tumbling brought more short positions into the mix. JBH may be a retailer and beholden to consumer confidence, but its HOME division is benefitting from rising house prices.

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.

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