The Short Report

Array
(
    [0] => Array
        (
            [0] => ((ACR))
            [1] => ((FMG))
            [2] => ((SBM))
            [3] => ((ILU))
            [4] => ((SGT))
            [5] => ((MSB))
            [6] => ((BNO))
            [7] => ((FLT))
        )

    [1] => Array
        (
            [0] => ACR
            [1] => FMG
            [2] => SBM
            [3] => ILU
            [4] => SGT
            [5] => MSB
            [6] => BNO
            [7] => FLT
        )

)

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 19, 2014

Last week saw volatile movements in the ASX 200 as a sudden short-covering rally sparked by a rebound in the iron ore price and the expiry of index and futures options led to the strongest day of the year, followed pretty quickly by profit-taking as traders locked in their FY14 results. There was a bit of movement among the most shorted stocks but no new names of any note to highlight.

Shorting resource sector stocks was popular last week with Fortescue, St Barbara and Iluka in the frame, while in the biotech space, Acrux has moved up to be the second most shorted stock on the market and Mesoblast continues to bounce around on one side of pairs trading.
 

Weekly short positions as a percentage of market cap:

10%+

COH   18.4
ACR    14.1
MND   12.8
JBH     12.2
TRS     11.7
UGL    11.4
MTS    10.6
MYR   10.5
PDN    10.4
NWS   10.3
ALQ    10.3

Out: SGT

9.00-9.99%

ILU, MTU, BLY, SGT, AGO

In: ILU, SGT 

8.00-8.99%

ASL, CAB, NXT

In: CAB, NXT                        Out: ILU         

7.00-7.99%

BKN, WHC, WSA, TSE, DSH,  

In: DSH          Out: CAB, NXT, MSB

6.00-6.99%

MIN, FMG, RRL, SGM, TEN, SCP, NUF

In: MIN, FMG, RRL, NUF    Out: FLT

5.00-5.99%

HVN, SBM, BRU, VET, OZL, GWA, WTF, HZN, FLT, NWH, KAR, SLR,

In:  SBM, GWA, WTF, FLT  Out: MIN, FMG, RRL, NUF, LYC, KAR, SLR
 

Movers and Shakers

As noted last week, Acrux ((ACR)) 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 continued to rise from its hole as it had the week before, providing ever more fodder for the shorters. A 1.9ppt short increase to 14.1% from 12.2% lifts ACR to second most shorted stock on the ASX, behind longstanding incumbent Cochlear.

A turn in the iron ore price saw Fortescue Metals ((FMG)) shares bounce back last week but the shorters saw an opportunity, lifting FMG into the 6% plus shorted bracket with a 1.2ppt increase to 6.4%. St Barbara ((SBM)) saw its shorts rise 1.5% to 5.7% despite the stock failing to respond to a sudden jump in the gold price.

Iluka Resources ((ILU)) was another miner seeing a significant increase in shorts, rising 1.1% to 9.7% despite little movement of note in its stock price.

On the short decrease side of the ledger, Singapore Telecom ((SGT)) shorts rose 1.6ppt the week before and fell 2.1ppt this week to 9.05% as this popular pairs trade candidate continued its perennial yo-yoing.

Mesoblast ((MSB)) has started to become something of a SingTel as well, with sharp short position movements up and down highlighting its popularity as a pairs trade candidate. MSB shorts fell 2.7ppt to 4.5% from 7.2% last week to take the stock out of our table, at least until next time. This week’s deal announced by fellow biotech Bionomics ((BNO)) with pharma giant Merck will likely affect more pairs play in MSB.

Flight Centre ((FLT)) was a stand-out among consumer discretionary stocks last week in joining the chorus of profit warnings but actually seeing a slight share price increases as a result. The warning was mild by comparison. FLT shorts fell 1.3ppt last week to 5.1%.

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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