The Short Report

This story features MYER HOLDINGS LIMITED, and other companies. For more info SHARE ANALYSIS: MYR

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 January 12, 2017

Welcome to the first FNArena weekly Short Report for 2017.

As of next week, this Report will revert to its regular format of providing a week-on-week update of movements in individual short positions on ASX stocks. But as this particular Report is the first for the year after a one month summer hiatus, this particular Report makes note of short position movements over the period of that month.

As one might expect, there are many. A comprehensive list of notable movements appears below in Movers & Shakers, but here are some highlights:

Aconex is now the most shorted stock on the ASX.

After a seeming eternity as a 10% plus shorted stock and often right up there among the most shorted, Monadelphous is now only shorted by 8%.

Mayne Pharma is now shorted 7.8% when not appearing in the 5% plus table last year.

The infant milk formula debacle has seen shorters take profits on Bellamy’s Australia, but lift shorts on A2 Milk Company.

Other companies seeing notable decreases in shorts include Western Areas, Independence Group, Orocobre, Japara Healthcare, Mantra Group, G8 Education and Ozforex.

Companies seeing notable increases in shorts include Perseus Mining and Ardent Leisure.

Weekly short positions as a percentage of market cap:

10%+

ACX   16.6
MYR   16.1
TFC     12.0
WSA   11.9
SYR    11.0
VOC   10.7
NEC    10.2
MTS    11.5

In: VOC          Out: MND

9.0-9.9%

WOR
 
Out: VOC, ORE, BAL, JHC, HSO  

8.0-8.9%

NWS, HSO, FLT, NXT, MND

In: MND, HSO, NXT             Out: AWC, MTR, IGO, DOW                                  

7.0-7.9%

AWC, DOW, MYX, MYO, EHE, BAL, ISD, ORE, IVC

In: BAL, ORE, AWC, DOW, MYX, ISD     Out: NXT, OFX, BEN, GEM, GTY, CVO

6.0-6.9%

JHC, SGH, GTY, RWC, BEN, PRU, BKL, CTD, MTR, CSV, SEK, ILU, OSH

In: JHC, MTR, GTY, BEN, PRU, CTD, CSV          Out: ISD, IFL, MSB, PRY, RIO, MLX

5.0-5.9%

WOW, MSB, GEM, BGA, IFL, RIO, IGO, A2M, OFX, CSR, AAD, AWE, CAB, AAC, ORI, IPH, MLX

In: IGO, OFX, GEM, MSB, IFL, RIO, MLX, A2M, AAD, AAC, IPH     

Out: SUL, CSV, GXL, DMP, SPO

Movers and Shakers

Construction industry software provider Aconex ((ACX)) has seen its shorts increase to 16.6% from 14.3%, leapfrogging the stock over former most-shorted stock Myer ((MYR)) on 16.1%.

A lifting of the Indonesian nickel export ban has sent the prices of Australian nickel miners diving and prompted profit-taking from shorters. Western Areas ((WSA)) shorts have fallen to 11.9% from 13.5% and Independence Group shorts have fallen to 5.6% from 8.0%.

The oil price recovery has prompted a revival in the fortunes of Monadelphous ((MND)), which has seen a fall to 8.1% from 10.1%.

A US antitrust lawsuit filed against Mayne Pharma ((MYX)) has seen shorts jump from under 5% to 7.8%.

We all know the Bellamy’s Australia ((BAL)) story. Shorts have fallen to 7.3% from 9.0% on profit-taking. Shorts in peer A2 Milk Company ((A2M)) have risen to 5.3% from under 5% prior.

The share price of mining darling du jour – lithium miner Orocobre ((ORE)) – has lately being flying around all over the shop. Shorts have fallen to 7.3% from 9.1%.

There was some relief in the residential aged care space, regulatory-wise, late last year. Shorts in Japara Healthcare ((JHC)) have fallen to 6.7% from 9.0%. Shorts in peer Estia Health ((EHE)) are hanging in there at 7.6%.

Perseus Mining ((PRU)) disappointed late last year with a list of problems at its gold mines in Cote D’Ivoire. Shorts have risen to 6.3% from under 5% prior.

The post-US election period has not been a joyous one for property trusts. Hotel and resort REIT Mantra Group ((MTR)) has seen its shorts fall to 6.2% from 8.3% on profit-taking.

The share prices of both child care centre operator G8 Education ((GEM)) and international payments processor Oxforex ((OFX)) have stabilised recently after a tough year. G8 shorts have fallen to 5.8% from 7.1% and Ozforex to 5.5% from 7.8%.

We also all know the Dreamworld story. Ardent Leisure ((AAD)) has popped into the bottom of the 5% plus shorted table at 5.3%.
 

ASX20 Short Positions (%)

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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