Short sellers increase interest in Russia
11 August 2014 London
Image: Shutterstock
Short interest in Russia is climbing in the wake of tough sanctions from the west, according to Markit Securities Finance analyst Andrew Laird.
With the crisis in Eastern Ukraine showing no sign of abating, “recent sanctions and potential new ones could see a further breakdown in business relationships between the west and Russia”, said Laird.
UK companies with large operations in Russia are “in an uncomfortable situation”, he explained. “As a result, we’ve seen large jumps in shorting activity in [mining firms] Petropavlovsk and Evraz.”
Petropavlovsk saw the largest amount of shorting as demand to borrow shares more than doubled to 16 percent of shares outstanding.
The percentage of Evraz shares out on loan jumped 50 percent in a week, reaching its highest level since the start of the conflict in Ukraine.
One surprise is Russian internet service provider Yandex, whose shares have seen a decline in short interest.
Demand to borrow shares in the firm is down almost two thirds to less than 1 percent of shares outstanding.
Russian focused exchange-traded products have also suffered 10 straight weeks of net outflows.
Laird said: “The large outflows out of Russian assets over the last two months have now topped $400 million, wiping out the inflows seen in April and May when investors saw the falling value of Russian assets as a buying opportunity.”
The Source RDX UCIT lost more than $100 million of assets in July, essentially halving the fund’s aggregate assets under management in the last eight weeks.
“US-based investors are also wasting little time unloading Russian assets as the Market Vectors Russia ETF Trust, the largest Russian focused ETF, saw $90 million of outflows in July.”
With the crisis in Eastern Ukraine showing no sign of abating, “recent sanctions and potential new ones could see a further breakdown in business relationships between the west and Russia”, said Laird.
UK companies with large operations in Russia are “in an uncomfortable situation”, he explained. “As a result, we’ve seen large jumps in shorting activity in [mining firms] Petropavlovsk and Evraz.”
Petropavlovsk saw the largest amount of shorting as demand to borrow shares more than doubled to 16 percent of shares outstanding.
The percentage of Evraz shares out on loan jumped 50 percent in a week, reaching its highest level since the start of the conflict in Ukraine.
One surprise is Russian internet service provider Yandex, whose shares have seen a decline in short interest.
Demand to borrow shares in the firm is down almost two thirds to less than 1 percent of shares outstanding.
Russian focused exchange-traded products have also suffered 10 straight weeks of net outflows.
Laird said: “The large outflows out of Russian assets over the last two months have now topped $400 million, wiping out the inflows seen in April and May when investors saw the falling value of Russian assets as a buying opportunity.”
The Source RDX UCIT lost more than $100 million of assets in July, essentially halving the fund’s aggregate assets under management in the last eight weeks.
“US-based investors are also wasting little time unloading Russian assets as the Market Vectors Russia ETF Trust, the largest Russian focused ETF, saw $90 million of outflows in July.”
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