This website is designed and maintained by Data Explorers to provide insight into market behaviour through the Securities Lending market. Our objective is to encourage a broader understanding and debate about the impact of the short-selling. We believe that stock lending levels can act as a proxy for short interest but we do not offer investment advice or research. We make observations about trends in the market for the reader to interpret as they see fit. The views expressed are those of the Editor and not Data Explorers.
As you can see from this graph of Banco Popular (POP), investors have been shorting this stock continuously since January this year. Then, the percentage of POP's %MCOL was 7%. Now, it has reached 10%. This morning, Fitch Ratings said it had downgraded POP's individual rating to 'A/B' from 'A', citing the bank's challenges in managing its construction and real estate exposure and defending asset quality amid a slowdown of the Spanish housing market and economy, while defending customer spreads and liquidity.
Utilisation is incredibly high at 81%, which means that it is now incredibly difficult to borrow this stock, and with a %MCOL of 10% (which is significant but not record breaking) there was probably little to borrow in the first instance. There are 7.52 Days to Cover. Despite the recent bounce, the Lendable Quantity has also seen a general decrease - from 79M shares in May to 72M earlier this month and then back up to 75.5M shares today. This means that long only investors are in general selling their shares.
This blog focuses a lot of attention on global retail stocks - and with good reason. This morning, DSG, the owner of Currys, Dixons and PC World confirmed an expected 30% slump in full-year underlying profit and reiterated its 'very cautious' view on the outlook for consumer spending. "The economic backdrop continues to be difficult and the group remains very cautious about consumer confidence in many of the markets in which is operates," the group said.
The troubled electronics retailer has been the target of short investors since November last year. Then, the percentage of the company's Market Cap on Loan to short sellers was 7%. Today, it is 28.44%, and rising. It is the second most borrowed stock in the Retail sector after HMV (HMV) at 38.03%, and also in the FTSE 250, where HMV is also the most shorted stock. Utilisation is high at 66%, presumably because the demand to borrow this stock is high. There are 15.47 Days to Cover.
Barclays (BARC) today announced its long-expected cash call to raise £4.5bn and bring in new investors, say the FT. The move is designed to lift Barclays' core equity Tier One capital ratio from about 5%, one of the lowest among European banks, to 6.3%, well aboveits 5.25% target. As you can see from the attached chart, Barclays paid a big dividend in March this year hence the spike in the percentage of its Market Cap on Loan for dividend yield enhancement reasons. However, you will see that there has also been a general increase in short interest too. Since June 6th the %MCOL has risen from 6.1% to 7.2% today, juxtaposed with a fall in share price from 342p on June 17th to 308p today. There are 7.57 Days to Cover. Interestingly, Utilisation is very low at 15%, so it is still easy to borrow the stock.
A report on the front page of the Financial Times this morning says that Chinese steelmakers have agreed to pay Anglo-Australian miner Rio (RIO) up to 96.5% more for their ore supplies this year, the largest ever annual increase and well above the 9.5% increase last year. This is a move likely to boost the cost of cars, machinery and other products, says the paper.
This rise suggests that demand for commodities from emerging economies remains strong in spite of the US slowdown. Our Best-Timed Shorts document for the first half of this year has something to say about this sector, among others. Please email me at email@example.com to find out more and receive your copy.
In the meantime, let's look at the short position in RIO's ASX listing. Since July 2006 RIO has been a target for short investors. At that time, the percentage of its Market Cap on Loan ebbed between 7% and 9%, and since then it has increased steadily but surely to 14% at its peak in February this year. However, RIO did not make the cut for our best-timed shorts document because as short positions in the mining company continued to rise, so did the price - from 75AUD in July 2006 to 155AUD at the end of May (please see the top graph graph for Rio Ltd ASX listing). Since May, the price has dropped from 155AUD to 138AUD today, rebounding from 130AUD on June 12th. Short sellers have now closed out their positions on RIO, perhaps because of today's story, and the %MCOL has decreased from 12% in January to 9.4% today.
In RIO's FTSE 100 listing, the short interest is significantly lower, with 1.7% MCOL today. You will see from this graph of RIO's London stock that the change in the borrow has been fairly low, ebbing around the 1% to 4% mark in the last two years. Experts say this could reflect investors who have been long London and short Australia reacting to the steel price news or anticipating the July 4th 2008 antitrust deadline for the BHP Billiton bid for RIO. The European Commission said last month that it would either rule on the mining giant's hostile takeover of its rival by this date or open an in depth antitrust probe into the deal. Short interest may have ebbed off in the Sydney listing as investors leave the trade ahead of the announcement.
There are resemblances in both BHP's Australian and London listings to RIO's equivalent. As you will see from this graph of BHP's ASX listing, investors have also increased their positions in the bidder and then closed out positions in the last three to four months, juxtaposed with a rise in price.
Like Rio, BHP's London listing is barely shorted at all, ebbing from 0% to 2.3% in the last two years, aside the spikes in the %MCOL for dividend yield enhancement, which is not genuine short interest. Please see the chart below for BHP's London listing.
Retail stocks in FTSE markets have been heavily borrowed in the last year, but little has been heard of Blacks Leisure Group (BSLA), despite its Market Cap on Loan having risen from 0.5% in July 2006 to 7.64% today. In January the %MCOL was at 10%. This is not at the top of the short interest charts, but it is a big increase nonetheless. Moreover the short has been well-timed, as investors have held on to the stock (where the Market Cap ebbed and flowed between 6% and 10% between July 2007 and now) as the price tumbled from 370p to 175p today. Utilisation is at 57.31% and there are 51.39 Days to Cover; a lot of time for those short sellers who are eager to return shares and take profits. Institutions have also been selling their long positions, as the Lendable Quantity has decreased from 9.7M shares two years ago to 4M today.
In connection with the FSA's short position disclosure requirement announced on 13th June 2008, below are the short interest charts of issuers with securities admitted to trading on a prescribed market that, to the FSA's knowledge, are in a right's issue period as at 19th June 2008:
It would be true to say that people did increase their short positions in HBOS last Wednesday (11th June) when the bank's share price slipped below the Right's Issue price of 275p. These shorts are covered by new borrows at the close of business (T + 3 settlement in the UK), hence the spike in the data for the most recent dataset (Tuesday).
However, the Rights Issues do not start trading until June 27th. The shorts outlined above are opportunistic in that the bank was in real trouble, not a manipulation of a Rights Issue, because it is not trading.
Between June 2nd and the present day both the long only traders were selling shares and short sellers were increasing borrowing in HBOS, which could explain the price falling. Institutions who held 989m shares sold 60m by June 16th. Hedge Funds, Prop desks and retail spread betters sold 90M shares from 130m to 220m.
"Short sellers have no more influence over share prices than any other traders. If selling pressure caused a share price to fall below what other investors judged to be its fair value, they would buy and the share price would be correct," said two commentators on ISLA today.
Anheuser Busch considers that InBev's offer is undervalued, according to dealReporter today. InBev is offering USD 46.35bn for Anheuser. Neither companies are the target of short investors at present, with InBev having 2.6% of its Market Cap on Loan (%MCOL) to short sellers, and Anheuser has 0.26%. InBev paid a dividend yield on April 30th which is reflected in the short interest chart here, but as you can see there has been a general increase in short interest in the past year, from 1% in June 2007 to 2.6% today. In relation to the Market Cap, InBev's Utilisation (or the percentage of the available stock) is high at 28%. The Utilisation for the rest of the BEL20 is 17.6%, and for the rest of the EMEA Food, Beverage & Tobacco sector it is 9.1%. At 8%, Anheuser's Utilisation is higher than the rest of the S&P500's average of 0.59% and the North America Food Beverage & Tobacco sector of 0.59% too.
According to dealReporter, Singapore Airlines (SIA) will not take a stake in troubled state-owned European airline Austrian Airlines Ag (AUA, as of June 12th). SIA had been tipped as a potential strategic partner for AUA after Sheikh Al Jaber's planned EUR 150m investment in the company fell through. Last week, dealReporter also wrote that Air France, Emirates and Air India have also been widely tipped as potential buyers, even though all said they were not interested in AUA. You can see from this graph of AUA that the airline, like most other airlines, has become the target of short sellers as of late. The percentage of the airline's Market Cap on loan to short investors (%MCOL) has increased from 2% on April 20th to 5% on June 4th. Short positions have now been covered and the %MCOL stands at 4.21%. The share price continues to fall: from 5.5EUR in March to 3.68EUR today. Utilisation is at 69.5%. With a %MCOL under 10% and Utilisation that high, supply is clearly difficult and expensive to come by. There are 10.71 Days to Cover.