The Short Report

Array
(
    [0] => Array
        (
            [0] => ((AGO))
            [1] => ((BCI))
            [2] => ((FMG))
            [3] => ((BDR))
            [4] => ((EVN))
            [5] => ((ACR))
            [6] => ((NXT))
        )

    [1] => Array
        (
            [0] => AGO
            [1] => BCI
            [2] => FMG
            [3] => BDR
            [4] => EVN
            [5] => ACR
            [6] => NXT
        )

)

This story features BCI MINERALS LIMITED, and other companies.
For more info SHARE ANALYSIS: BCI
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 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 November 27, 2014.

After a couple of weeks of selling, last week saw a bit of a bounce for the ASX200. That is, until the end of the week when OPEC set off a two-day sell-a-thon, first in energy stocks and then in everything, as the Aussie tanked foreign investors headed for the exits.

This brief period of consolidation resulted in a lot of shuffling around in our 5% shorted table, affecting a lot of bracket creep both up and down. Larger moves were fewer, and indeed their were no short increases of one percentage point or more. We nevertheless saw short decreases of one percentage point or more for Beadell Resources, Acrux and NextDC, for individual reasons.

Beyond that, it is of no surprise iron ore miners have been featuring among short increases of late. Last week saw the most popular iron ore short, Atlas Iron ((AGO)), move up to third from fifth most shorted stock on the ASX with a 0.8ppt increase to 13.2% from 12.5%. BC iron ((BCI)) saw its shorts rise 0.5ppt to 9.0% from 8.5%, bringing the stock alongside peer Fortescue Metals ((FMG)) in the nines.
 

Weekly short positions as a percentage of market cap:

10%+

MYR   18.1
MTS    13.7
AGO   13.2
JBH     12.5
UGL    12.5
ACR    12.3
PDN    12.1
NWS   11.0
KCN   10.9
MIN    10.4
RRL    10.1
COH   10.0    

No changes    

9.0-9.9%

FMG, BCI

In: BCI            Out: NXT, MML

8.0-8.9%

MML, SGM, NXT, PBG, SUL

In: NXT, MML, PBG             Out: BCI, WHC, MND, BDR

7.0-7.9%

WHC, WSA, CAB, MND, DSH, EVN, ALQ

In: WHC, MND, EVN, ALQ             Out: PBG, TRS, ILU, ASL

6.0-6.9%

MSB, TRS, FLT, ASL, BDR, ILU, KAR, VRT, CDD, CRZ, MRM

In: BDR, TRS, ILU, ASL, VRT, CDD, MRM          Out: EVN

5.0-5.9%

PRY, ORI, SXL, DOW, GNC, TEN, SLR

In: ORI, GNC            Out: VRT, CDD, MRM, BRU
 

Movers and Shakers

The USD gold price staged a bit of a rally the week before last towards the US$1200 mark, although this did nothing special for the share price of Beadell Resources ((BDR)). There was no new news from BDR last week yet short positions in the stock dropped 1.3ppt to 6.7% from 8.0%. There may be a clue in a 0.5ppt increase in Evolution Mining ((EVN)) shorts to 7.1% from 6.6%, implying a possible goldminer pairs trade.

Acrux ((ACR)) has been sitting high on the most shorted table for many months now. The biotech became a popular short target when the evidence of heart problem side effects from testosterone drugs emerged in the US, leading the FDA to call an investigation. The FDA is yet to report back but the European equivalent last week announced it could find no conclusive connection, sparking a 30% rally in ACR shares. The rally clearly included short covering, as ACR shorts have fallen 1.3ppt to 12.3% from 13.6%.

ACR has slipped to sixth from third most shorted stock on the ASX.

Data centre company NextDC ((NXT)) held an upbeat AGM the week before last, but its share price has fallen ever since. Given the share price rallied into the AGM on expectation of good news, and NXT just happened to pick a week in which foreigner investors were bailing out of Australia, we can probably see why. But it provided a chance for the shorters to cover, sending NXT shorts down 1.0ppt to 8.7% from 9.7%.

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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