The Short Report

Array
(
    [0] => Array
        (
            [0] => ((NAB))
            [1] => ((JBH))
            [2] => ((AWC))
            [3] => ((FLT))
            [4] => ((PRY))
            [5] => ((MTS))
            [6] => ((VOC))
            [7] => ((CYB))
            [8] => ((BEN))
            [9] => ((BOQ))
        )

    [1] => Array
        (
            [0] => NAB
            [1] => JBH
            [2] => AWC
            [3] => FLT
            [4] => PRY
            [5] => MTS
            [6] => VOC
            [7] => CYB
            [8] => BEN
            [9] => BOQ
        )

)

This story features NATIONAL AUSTRALIA BANK LIMITED, and other companies.
For more info SHARE ANALYSIS: NAB
The company is included in ASX20, ASX50, 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 February 11, 2016

Last week saw the ASX200 breaking down through its previous low on heightened global banking fears, another fall in the oil price, and general global recession worries. It was also a week which saw a smattering of corporate earnings results.

While the 10% plus table below suggests “no changes” last week, that’s to the make-up of the table and not to positions themselves. While earnings results have the power to spark sudden shifts in short positions, cold feet going into a result release can also be evident.

Thus while no one left the 10% plus club last week there were some notable short reductions.

Alumina, Flight Centre and Primary Health Care saw short reductions of 1-2 percentage points ahead of their results while JB Hi-Fi shorts fell after another solid result from the retailer. Primary’s move is notable, as is explained below.

Metcash reports out of the Jun-Dec cycle but its shorts fell sharply last week, albeit still not enough to prevent the stock from remaining as a clear number one.

On the other side of the ledger, Vocus Communications has been a steady mover up the 5% plus shorted table for some time and the week before last, just snuck over the 10% mark. Last week Vocus shorts jumped up to 14.5%.

All other moves at the lower end of the table represent bracket creep, with the exception of CYBG (Clydesdale Bank), which has disappeared after what was no doubt a brief arbitrage related to its spin-off from National Bank ((NAB)).

Weekly short positions as a percentage of market cap:

10%+

MTS    19.3
MND   17.3
MYR   17.1
WSA   15.2
MIN    14.9
VOC   14.8
ORI     13.1
AWC   12.7
FLT     12.6
GXL    12.5
WOR   11.9
CAB    11.8
PRY    10.8
JBH     10.4    
SEK    10.1

No changes    

9.0-9.9%

AWE, WOW, GEM
 
In: GEM

8.0-8.9%

RFG, TFC, ALQ, SGH, SUL, ARI

In: ARI                       Out: IVC, FMG

7.0-7.9%

WHC, IVC, FMG, KAR, SGM, MRM, CAR

In: IVC, FMG             Out: ARI, CYB

6.0-6.9%

DSH, PDN, SYR

Out: GWA

5.0-5.9%

BPT, GWA, AAC, CTD, CDD, BKN, SVW, MGX, ILU, IFL, AHY, GUD, SCP, GMA, BOQ, SWM, IMF, SHV

In: GWA, CDD, GUD, GMA, SHV             Out: NWS, BEN

Movers and Shakers

Electronics retailer JB Hi-Fi ((JBH)) saw its shorts drop to 11.9% from 13.2% the week ahead of its result release and post another solid result another 1.8 percentage point drop takes us to 10.1%. Rarely is JB ever out of the 10% shorted club and rarely does the company disappoint with earnings, so what the fixation is is anybody’s guess.

Falls of 1.0ppt for alumina/aluminium producer Alumina Ltd ((AWC)) to 12.7% and travel agent Flight Centre ((FLT)) of 1.5ppt to 12.6% likely represent nothing more than some squaring up ahead of results.

The same was likely true for Primary Health Care ((PRY)) and for the 1.5ppt worth of shorts who got out, probably a blessing. Following the company’s result yesterday the share price jumped 20%. Primary shorts remained last week at 10.8% so it will be interesting to see the level of covering apparent in this Report next week, which undoubtedly was the major driver of that rally.

Metcash ((MTS)) is not set to report in this cycle but the most shorted stock in the market suddenly found some support last week, probably because as the banks, miners and oil companies crashed, supermarkets seemed a safer place to hide. Metcash shorts fell 1.4ppt to 19.3% but there’s still some margin to second place.

Vocus Communications ((VOC)) started life as a fibre cable provider but has recently gobbled up two peers in the general fibre, data, digital space to become a formidable “new world” conglomeration. While one might argue acquisition risk is one reason the shorters have quietly taken more and more interest, the fact Vocus shares have risen over the past six months when the market has gone to hell in a hand cart is quite possibly reason in itself.

After another 4.5ppt of shorts were added last week, Vocus is now the sixth most shorted stock in the market at 14.8% and quite the shag on a rock amongst the more obvious retailer, mining and mining services names in the high echelons.

I noted last week, just out of interest’s sake, that while we have never in my recollection had a bank in the 5% plus table before, last week we saw two sneak in in the form of NAB’s UK spin-off CYBG ((CYB)) and local regional Bendigo & Adelaide Bank ((BEN)).

Well last week what was no doubt an arbitrage play on the NAB-Clydesdale deal appears to have been closed out while Bendelaide has also slipped out of the table again, albeit to be replaced by regional peer Bank of Queensland ((BOQ)) at 5.1%.
 

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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