Short sellers do well in Europe
04 September 2014 London
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Short sellers did well in Europe during August despite a surge in shares, according to Markit Securities Finance analyst Simon Colvin.
August has brought “increasingly bearish macroeconomic news”, said Colvin, causing equity markets in Europe to rebound from recent lows as investors increasingly expect further monetary easing from the European Central Bank (ECB).
“Despite all this talk of ECB driven risk rally, shorts have managed to continue to perform relatively well in Europe as the 10 percent of shares which command the highest fee in the securities lending market, a gauge of how committed short sellers are in a name, have continued to underperform,” he said.
“The shares with the highest fee amongst the Markit Developed Europe universe have returned 0.6 percent over the month of August, which is nearly 1 percent lower than the returns posted by the wider universe.”
Colvin added that August’s underperformance is the largest in three months, and marks the fifth month in a row in which expensive to borrow shares have trailed behind the rest of the market.
“The fact that the most expensive to borrow names have underperformed in such a consistent manner over six of the last eight months has taken their cumulative underperformance to 4.6 percent, making it the worst performing group of shares when ranking by cost to borrow.”
August has brought “increasingly bearish macroeconomic news”, said Colvin, causing equity markets in Europe to rebound from recent lows as investors increasingly expect further monetary easing from the European Central Bank (ECB).
“Despite all this talk of ECB driven risk rally, shorts have managed to continue to perform relatively well in Europe as the 10 percent of shares which command the highest fee in the securities lending market, a gauge of how committed short sellers are in a name, have continued to underperform,” he said.
“The shares with the highest fee amongst the Markit Developed Europe universe have returned 0.6 percent over the month of August, which is nearly 1 percent lower than the returns posted by the wider universe.”
Colvin added that August’s underperformance is the largest in three months, and marks the fifth month in a row in which expensive to borrow shares have trailed behind the rest of the market.
“The fact that the most expensive to borrow names have underperformed in such a consistent manner over six of the last eight months has taken their cumulative underperformance to 4.6 percent, making it the worst performing group of shares when ranking by cost to borrow.”
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