Raising the stakes
20 February 2018
Samuel Pierson, director of securities finance at IHS Markit, explains how short sellers are raising the stakes on UK short positions
Image: Shutterstock
Bearish bets on UK equities have increased amidst sell-off
Outsourcing firms continue to see short demand increase
Short demand in GBP terms highest post-crisis
With the FTSE 350 index down over 5 percent amid the global correction, it’s not surprising that short sellers have increased their positions. Given how far many of the more popular shorts have declined in value, it’s a reflection of significantly increasing demand to see the short balance in GBP terms up 2 percent year-to-date. The current 30.8 billion in short balances represents the largest position for short sellers in UK equities since Q1 2009. The largest short balances are concentrated in the materials, energy and food and staples retailing industry groups, which together account for 38 percent of UK short balances.
Short positions in the FTSE 350 have only increased amid the selloff, with the average short demand at 2.3 percent of outstanding shares. This is driven by both a larger number of stocks with high demand, as well as increasing demand for the stocks which were already highly shorted.
Following the collapse of Carillion, short sellers have added to bets against other outsourcing firms, particularly Interserv (IRV). After initially rallying with the rest of the market in January, IRV shares have tumbled again, now down more than 20 percent year-to-date. During that time, short sellers increased their position by 1.2 percent of shares outstanding, bringing the total to 16.3 percent.
Other outsourcing firms which have seen meaningful increases in short demand year to date include Capita and Serco Group. The exception is Balfour Beatty, where short demand has declined by nearly 1 percent of shares outstanding year to date.
Short sellers have also maintained positions in the two most popular grocery shorts, J Sainsbury and WM Morrison Supermarkets, with both still in the top 10 UK shorts in
GBP terms.
The most shorted UK equity by percentage of market cap is Cineworld Group plc, which currently has short balances equal to 24 percent of outstanding shares. It’s important to note that this is primarily a bet on the completion of the firm’s $3.6 billion acquisition of Regal Entertainment and not an outright short of Cineworld. With that said there were a large number of shorts in Regal, so it’s possible the combined firm will come under short seller scrutiny as well.
Outsourcing firms continue to see short demand increase
Short demand in GBP terms highest post-crisis
With the FTSE 350 index down over 5 percent amid the global correction, it’s not surprising that short sellers have increased their positions. Given how far many of the more popular shorts have declined in value, it’s a reflection of significantly increasing demand to see the short balance in GBP terms up 2 percent year-to-date. The current 30.8 billion in short balances represents the largest position for short sellers in UK equities since Q1 2009. The largest short balances are concentrated in the materials, energy and food and staples retailing industry groups, which together account for 38 percent of UK short balances.
Short positions in the FTSE 350 have only increased amid the selloff, with the average short demand at 2.3 percent of outstanding shares. This is driven by both a larger number of stocks with high demand, as well as increasing demand for the stocks which were already highly shorted.
Following the collapse of Carillion, short sellers have added to bets against other outsourcing firms, particularly Interserv (IRV). After initially rallying with the rest of the market in January, IRV shares have tumbled again, now down more than 20 percent year-to-date. During that time, short sellers increased their position by 1.2 percent of shares outstanding, bringing the total to 16.3 percent.
Other outsourcing firms which have seen meaningful increases in short demand year to date include Capita and Serco Group. The exception is Balfour Beatty, where short demand has declined by nearly 1 percent of shares outstanding year to date.
Short sellers have also maintained positions in the two most popular grocery shorts, J Sainsbury and WM Morrison Supermarkets, with both still in the top 10 UK shorts in
GBP terms.
The most shorted UK equity by percentage of market cap is Cineworld Group plc, which currently has short balances equal to 24 percent of outstanding shares. It’s important to note that this is primarily a bet on the completion of the firm’s $3.6 billion acquisition of Regal Entertainment and not an outright short of Cineworld. With that said there were a large number of shorts in Regal, so it’s possible the combined firm will come under short seller scrutiny as well.
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