Shipping sector heavily shorted - Data Explorers
02 November 2011 London
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Though the Baltic Dry Index (BDI) has seen a revival, so too have heavy shorts in the shipping sector, according to Data Explorers.
"There is a real disconnect between market conditions and stock pricing in the shipping industry," notes the analytics firm, adding that the BDI has jumped 66 per cent over the third quarter and October and is up 14 per cent year-to-date, despite continued concerns about global growth, reduced earnings and excess shipping capacity.
Average short interest across the global ICB Marine Transportation sector, which is made up of 107 stocks, currently stands at 2.6 per cent of total shares.
The most shorted shipping stock with a market cap over $1 billion, China Cosco, had seen short interest climb to a 22 month high of 14.6 per cent of total shares by the end of the third quarter but as the stock price rebounded from annual lows, shorts have since covered positions to 11.6 per cent of total shares. Meanwhile, institutional investors have shown negative sentiment towards the stock and have reduced holdings to annual lows of 14 per cent of market cap.
The company has predicted a full-year loss and plans to idle container ships if falling rates in the dry-bulk shipping market do not improve.
The situation is not much better on the oil shipment side and Data Explorers notes that there is an even split between the most shorted companies being oil and dry shipment focused, which may indicate a sector wide problem rather than the nature of cargo.
Securities lending flow data for the most shorted companies or those with the largest increase in short interest analysed by Data Explorers show lendable supply out on loan at or near annual highs or a reduction in the holdings of institutional investors who lend.
Even ancillary companies are feeling the effects. Marine services company, Bourbon, has seen an increase in short interest to seven per cent in October even as the share price rebounded off annual lows and after some short covering in the third quarter. Almost all of the lendable supply remains out on loan, a trend seen over the year.
"There is a real disconnect between market conditions and stock pricing in the shipping industry," notes the analytics firm, adding that the BDI has jumped 66 per cent over the third quarter and October and is up 14 per cent year-to-date, despite continued concerns about global growth, reduced earnings and excess shipping capacity.
Average short interest across the global ICB Marine Transportation sector, which is made up of 107 stocks, currently stands at 2.6 per cent of total shares.
The most shorted shipping stock with a market cap over $1 billion, China Cosco, had seen short interest climb to a 22 month high of 14.6 per cent of total shares by the end of the third quarter but as the stock price rebounded from annual lows, shorts have since covered positions to 11.6 per cent of total shares. Meanwhile, institutional investors have shown negative sentiment towards the stock and have reduced holdings to annual lows of 14 per cent of market cap.
The company has predicted a full-year loss and plans to idle container ships if falling rates in the dry-bulk shipping market do not improve.
The situation is not much better on the oil shipment side and Data Explorers notes that there is an even split between the most shorted companies being oil and dry shipment focused, which may indicate a sector wide problem rather than the nature of cargo.
Securities lending flow data for the most shorted companies or those with the largest increase in short interest analysed by Data Explorers show lendable supply out on loan at or near annual highs or a reduction in the holdings of institutional investors who lend.
Even ancillary companies are feeling the effects. Marine services company, Bourbon, has seen an increase in short interest to seven per cent in October even as the share price rebounded off annual lows and after some short covering in the third quarter. Almost all of the lendable supply remains out on loan, a trend seen over the year.
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