The Short Report

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(
    [0] => Array
        (
            [0] => ((MTS))
            [1] => ((MYR))
        )

    [1] => Array
        (
            [0] => MTS
            [1] => MYR
        )

)

This story features METCASH LIMITED, and other companies.
For more info SHARE ANALYSIS: MTS
The company is included in ASX100, ASX200, ASX300 and 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 September 3, 2015.

Last week saw the ASX200 roll over from its initial bounce out of correction depths as a second wave of selling gathered steam. The result season was all but over last week but we did see a late result from top-of-the-shorted-table Myer which sparked another round of selling for the already beaten-down department store.

A few shorts were tempted to take profits as the share price fell on an announced capital raising, although a greater than one percentage point drop still leaves Myer shorts at 19.9%, suggesting most shorters are in for the long haul.

They also appear in for the long haul for retail colleague Metcash ((MTS)), and indeed a 0.5% increase in Metcash shorts last week to 21.3% means we have a new frontrunner among the most shorted stocks on the ASX.

Metcash reports its FY15 result later in the year.

Beyond this little shuffle at the top of the table, the end of result season also appears to have brought with it a hiatus in shorting activity. While there is plenty of red and green on our 5% plus table below, all represent minor bracket creep up and down on less than one percentage point moves.

Weekly short positions as a percentage of market cap:

10%+

MTS    21.3
MYR   19.9
ORI     16.4
CAB    16.2
MND   15.2
SGH    15.0
MRM  13.1
PRY    12.3
UGL    11.9
MIN    11.9
FLT     11.6
DSH    11.2

Out: WOR, FMG

9.0-9.9%

GEM, WOR, CDD, SUL, GWA, JBH, FMG, MGX
 
In: WOR, FMG, MGX           Out: GXL                              

8.0-8.9%

GXL, SEK, NEC, WOW, AWE, STO, ALQ, KAR

In: GXL, NEC                        Out: MGX     

7.0-7.9%

AWC, KCN, ARI, NWH, PRG, BKN, MSB

In: ARI                       Out: NEC, SXY

6.0-6.9%

JHC, ILU, SXY, PDN, WHC, SGN, CAR, RRL, NWS

In: SXY, ILU, RRL, NWS               Out: SWM

5.0-5.9%

NXT, SWM, SPO, TFC, FXL, IVC, CVO, SGM, DLS, RFG, IGO, SKI, PBG, TEN, NST, AAC, AAD, IFL

In: SWM, DLS, SKI, NST, IFL         Out: ILU, RRL, NWS

Movers and Shakers

For many months, department store Myer ((MYR)) has been entrenched as the most shorted stock on the ASX. With rival David Jones now in private hands, Myer remains the only listed example of the anachronistic concept of a bricks & mortar department store chain. David Jones, too, had been popular with the shorters on the same theme before its South African takeover, but DJs always had one advantage over its rival.

DJs owned its properties and Myer rented. Thus DJs always had a floor value implicit in its valuable portfolio of CBD and major suburban shopping hub real estate. Myer is now raising new capital in an attempt to reinvent itself to challenge its higher price-point competitor and to shift, belatedly, into the online universe. Will it work? Myer shorts dropped 1.4 percentage points last week but that still leaves 19.9% of shorted stock saying no, it won’t.

And just to stick the boot in, the first profit result from Woolworths SA since its acquisition showed DJs doing rather well, thank you very much.

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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