Heavy shorts in retail sector, miners ahead of earnings season
10 October 2011 London
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Data Explorers analysis shows increased short selling activity for miners and retailers ahead of what is predicted to be another disappointing earnings season.
Leading the miners for earnings reports is Aluminium producer Alcoa, which had its recovery stall when aluminium prices fell in a broad-based commodities sell-off.
As share prices continued to fall, shorts returned after having covered positions in the second quarter, while a convertible bond in issue may spur arbitrage trading, Data Explorers reports.
Uranium Energy, meanwhile, has seen historical heavy shorts recently and, though institutional investors which lend have expressed positive sentiment and are increasing holdings amid the miners' progressing expansion plans, two-thirds of the lendable supply is out on loan.
On the retail side, the US' sector has become increasingly short evidenced by the decline in the Data Explorers' Long Short Ratio. It peaked at 9 in April and has since fallen to 6.75, meaning that longs outnumber shorts by just under seven times.
"This increased negative sentiment is similar to levels seen a year ago and the six month decline represents the longest fall in the retail ratio for over three years," Data Explorers writes.
In contrast to the US, the Long Short Ratio for the European retail sector has increased from its annual low of 4.7 in May to 6.1.
Still, UK retailers are seeing high levels of short interest, with Next topping the list of FTSE 100 companies with the greatest percentage of stock on loan at 7.1 per cent and second tier retailers continuing to dominate the top 10 list across the broader FTSE All Share Index, according to Data Explorers.
Leading the miners for earnings reports is Aluminium producer Alcoa, which had its recovery stall when aluminium prices fell in a broad-based commodities sell-off.
As share prices continued to fall, shorts returned after having covered positions in the second quarter, while a convertible bond in issue may spur arbitrage trading, Data Explorers reports.
Uranium Energy, meanwhile, has seen historical heavy shorts recently and, though institutional investors which lend have expressed positive sentiment and are increasing holdings amid the miners' progressing expansion plans, two-thirds of the lendable supply is out on loan.
On the retail side, the US' sector has become increasingly short evidenced by the decline in the Data Explorers' Long Short Ratio. It peaked at 9 in April and has since fallen to 6.75, meaning that longs outnumber shorts by just under seven times.
"This increased negative sentiment is similar to levels seen a year ago and the six month decline represents the longest fall in the retail ratio for over three years," Data Explorers writes.
In contrast to the US, the Long Short Ratio for the European retail sector has increased from its annual low of 4.7 in May to 6.1.
Still, UK retailers are seeing high levels of short interest, with Next topping the list of FTSE 100 companies with the greatest percentage of stock on loan at 7.1 per cent and second tier retailers continuing to dominate the top 10 list across the broader FTSE All Share Index, according to Data Explorers.
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