The Short Report

By Rudi Filapek | More Articles by Rudi Filapek

Welcome to the first FNArena Short Report for 2020. As the Short Report has been taking its annual leave this past month, the first report of the year will track changes in short positions over the period of the month to January 16. As of next week, the report will revert to its usual mode of weekly updates.

Over the month to January 16, the ASX200 rallied a net 3.7%, and rallied 5.3% from the December 31 book-squaring sell-off. As of yesterday the index was up 5.3% and 6.7% respectively.

It may be hard to fathom exactly what, beyond momentum and FOMO, has driven the market to such giddy heights when there’d be every excuse to think otherwise, but we can note that short-covering has had little to do with it. Over the period, only four stocks saw moves in either direction of one percentage point or more.

We can dismiss the first stock straight up. Kirkland Lake Gold ((KLA)) is a Canadian-based miner listed in all of Toronto, New York and Australia and as such its short position – up to 28.8% now from 22.6% a month ago – is almost certainly the reflection of a geographical arbitrage play (sell in one location and buy in another) and is not worth analysing again in this Report in 2020, as it was tedious enough in 2019.

In the real world, shorts in graphite miner Syrah Resources ((SYR)) have risen to 16.8% from 15.8%, shorts in Resolute Mining ((RSG)) have risen to 11.1% from 9.0%, shorts in Mineral Resources ((MIN)) have fallen to 8.8% from 10.7%, and shorts in oOh!media ((OML)) have fallen from 6.6% to below 5%. Hence the latter stock has fallen off the table.

See Movers & Shakers below.

Weekly short positions as a percentage of market cap:

10%+
KLA    28.8
GXY   17.8
SYR    16.8
ORE    13.7
SDA    13.0
ING     12.1
NEA    12.0
GWA  11.9
NXT    11.9
JBH     11.4
RSG    11.1
BGA   11.0
CGC    10.7
WEB   10.2
MTS    10.0

In: RSG           Out: MIN, DMP, BKL

9.0-9.9
DMP, BKL, SUL

In: DMP, BKL, SUL              Out: RSG

8.0-8.9%
MIN, HUB, IVC, NUF, PLS

In: MIN, PLS              Out: SUL, A2M

7.0-7.9%
PPT, CUV, HVN, NCZ, A2M, CTD, MYR, IFL

In: A2M, CTD                        Out: PLS, CGF, BIN

6.0-6.9%
BEN, BIN, BOQ, RWC, CGF, PNI, SGM, NEC, BWX

In: BIN, CGF, PNI                 Out: CTD, OML

5.0-5.9%
CLH, MND, AMP, RFF, CLQ, MYX, GMA, MSB, COE, JIN, WOR

In: MSB, JIN              Out: PNI, DCN, GNC, CMW, BEN, SLR

Movers & Shakers

The problem for Syrah Resources, as with lithium miners such as Galaxy Resources ((GXY)) and Orocobre ((ORE)), is that they are ahead of their time. Few question the assumption the demand for new-age batteries will surge in the years ahead, for EVs and power storage in particular, but at this stage the supply curve remains well ahead of the demand curve.

To that end, Syrah has been forced to reduce production at its Balama graphite mine in order to sustain commercial pricing. Lithium is in similar oversupply and battery-related commodity prices in general (which includes nickel) were highly volatile over 2019, and thus so too miner share prices.

2020 will likely bring more of the same. Hence we can expect these stocks to remain atop the most shorted table for now, and weekly moves one percentage point or more in short positions to be common. Over the month, Syrah shorts rose to 16.8% from 15.8%.

Shorts in Resolute Mining were on the rise late in 2019 as the company struggled with production problems at its Syama gold sulphide processing plant. The company has since divested of its high-cost Ravenswood mine, alleviating a risk of further capital requirement and allowing a greater focus on its West African assets. December quarter production was mixed but not unexpected; shorts have risen to 11.0% from 9.0%.

Most notable is that with gold at US$1550/oz, Resolute Mining is the lone gold miner on the 5% plus shorted table.

Mineral Resources ((MIN)) is a lithium miner, hence no surprise it had moved up into the 10%-plus shorted group late last year. What is often overlooked in the company is also a mineral processor – the revenues from which are far more stable than mining – and also an iron ore miner. With the iron ore price hanging in there around the US$95/t mark, shorts on MinRes have fallen to 8.8% from 10.7%.

Out-of-home (OOH), meaning outdoor, advertiser ohH!media surprised the market with a downgrade to forward guidance at its full-year result back in August last, due to weak trading conditions. And then lo and behold didn’t trading conditions suddenly snap back in the December quarter. The result was a brief period of the stock appearing in the 5%-plus shorted table last year, before last month it dropped off from 6.6% shorted.

ASX20 Short Positions (%)

CODE LAST WEEK WEEK BEFORE CODE LAST WEEK WEEK BEFORE
AMC 0.7 0.7 NCM 1.4 1.4
ANZ 0.5 0.5 RIO 4.0 4.1
BHP 3.1 3.1 SCG 0.5 0.6
BXB 0.3 0.2 SUN 0.6 0.6
CBA 0.7 0.7 TCL 0.4 0.5
CSL 0.1 0.1 TLS 0.3 0.3
GMG 0.3 0.3 WBC 0.5 0.5
IAG 0.5 0.4 WES 0.7 0.8
MQG 0.4 0.3 WOW 0.6 0.6
NAB 0.5 0.5 WPL 0.8 0.8

To see the full Short Report, please go to this link

Guide:

The Short Report draws upon data provided by the Australian Securities & Investment Commission (ASIC) to highlight significant weekly moves in short positions registered on stocks listed on the Australian Securities Exchange (ASX). Short positions in exchange-traded funds (ETF) and non-ordinary shares are not included. Short positions below 5% are not included in the table below but may be noted in the accompanying text if deemed significant.

Please take note of the Important Information provided at the end of this report. Percentage amounts in this report refer to percentage of ordinary shares on issue.

Stock codes highlighted in green have seen their short positions reduce in the week by an amount sufficient to move them into a lower percentage bracket. Stocks highlighted in red have seen their short positions increase in the week by an amount sufficient to move them into a higher percentage bracket. Moves in excess of one percentage point or more are discussed in the Movers & Shakers report below.

Rudi Filapek

About Rudi Filapek

Rudi Filapek-Vandyck is approaching three decades as an active journalist. During the nineties, Rudi successfully built a financial news wire in Europe. After arriving in Australia in 2000, he worked on several projects before founding FNArena.

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