Short sellers zero in on UK hospitality sector
20 May 2016 London
Image: Shutterstock
The UK’s hard-pressed hospitality sector has caught the eye of short sellers as the looming EU Referendum and legislative pressures have thrown the future of the sector into uncertainty, according to Markit.
The financial information provider noted a 30 percent increase in short interest in consumer services FTSE 350 constituents so far this year, representing an 11-month high for the sector.
The UK hospitality sector, which relies heavily on affordable labour with a high turnover rate, has been caught between a potential drought of future foreign labour caused by the possibility of the UK voting to leave the EU in June and the recent rise in UK’s minimum wage.
The Markit/CIPS UK Services PMI indicated that the living wage coincided with a sharp rise in costs.
Markit explained that “most of the surge in shorting activity has occurred in the weeks since the referendum was announced in February and short sellers show no signs of slowing down in the lead-up to next month’s election despite the news that the ‘remain’ camp was ahead by 15 percent in a recent poll”.
Whitbread and Restaurant Group have seen the largest jump in short interest so far across the sector.
Whitbread has seen short interest explode by 500 percent so far in 2016 to 3.1 percent of shares outstanding, according to Markit’s data.
Restaurant Group in turn suffered a 50 percent drop in share price after issuing three profit warnings.
The financial information provider noted a 30 percent increase in short interest in consumer services FTSE 350 constituents so far this year, representing an 11-month high for the sector.
The UK hospitality sector, which relies heavily on affordable labour with a high turnover rate, has been caught between a potential drought of future foreign labour caused by the possibility of the UK voting to leave the EU in June and the recent rise in UK’s minimum wage.
The Markit/CIPS UK Services PMI indicated that the living wage coincided with a sharp rise in costs.
Markit explained that “most of the surge in shorting activity has occurred in the weeks since the referendum was announced in February and short sellers show no signs of slowing down in the lead-up to next month’s election despite the news that the ‘remain’ camp was ahead by 15 percent in a recent poll”.
Whitbread and Restaurant Group have seen the largest jump in short interest so far across the sector.
Whitbread has seen short interest explode by 500 percent so far in 2016 to 3.1 percent of shares outstanding, according to Markit’s data.
Restaurant Group in turn suffered a 50 percent drop in share price after issuing three profit warnings.
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