Sungard - US short interest up since 2008
Balances on loan for US equities have risen “almost inexorably” since September 2008, according to Sungard. This is despite reports proclaiming short interest in the US has dropped to its lowest levels since that time.
Balances on loan for US equities in Sungard’s sample have grown around 70% from 13.5bn shares in September 2008 to more than 23bn at the end of June 2014.
“While our client base, and therefore the breadth and depth of the data we cover, has grown substantially over this period, growth alone cannot account for all the observable increase in loan balances,” said an analyst at Sungard.
“Adjusting for our own growth of customers and coverage dulls this value somewhat, but it certainly does not take it into negative territory.”
The analyst went on to say that SunGard’s Astec Analytics data suggests that there are “significant” short positions to be taken by investors positioning themselves for a correction.
The rise in S&P valuation, which has recovered 189% since its 2009 low, has been led by big market leader companies in internet, technology and biotechnology. Sungard believes some of these sorts of stocks, and those of smaller firms, are trading at high multiples.
“Short interest viewed as a whole can give some guidance as to the level of expectations that the bubble may be about to burst,” said the analyst.
“Looking at all North American equities on loan over the last 12 months shows an increase in balance of about 35%. Some of this could well be attributed to an increasing use of equities as collateral and a continuing growth in our customer base, but neither can alone justify a 20% increase in arguably the world’s biggest securities lending market.”
The report finished by adding that with increasingly good economic news around the world, there could be new growth opportunities returning to the more traditional industries, which would in turn release investments from sectors that have arguably become too crowded, where the pressure to buy and be included has perhaps been a force for rising prices.
Balances on loan for US equities in Sungard’s sample have grown around 70% from 13.5bn shares in September 2008 to more than 23bn at the end of June 2014.
“While our client base, and therefore the breadth and depth of the data we cover, has grown substantially over this period, growth alone cannot account for all the observable increase in loan balances,” said an analyst at Sungard.
“Adjusting for our own growth of customers and coverage dulls this value somewhat, but it certainly does not take it into negative territory.”
The analyst went on to say that SunGard’s Astec Analytics data suggests that there are “significant” short positions to be taken by investors positioning themselves for a correction.
The rise in S&P valuation, which has recovered 189% since its 2009 low, has been led by big market leader companies in internet, technology and biotechnology. Sungard believes some of these sorts of stocks, and those of smaller firms, are trading at high multiples.
“Short interest viewed as a whole can give some guidance as to the level of expectations that the bubble may be about to burst,” said the analyst.
“Looking at all North American equities on loan over the last 12 months shows an increase in balance of about 35%. Some of this could well be attributed to an increasing use of equities as collateral and a continuing growth in our customer base, but neither can alone justify a 20% increase in arguably the world’s biggest securities lending market.”
The report finished by adding that with increasingly good economic news around the world, there could be new growth opportunities returning to the more traditional industries, which would in turn release investments from sectors that have arguably become too crowded, where the pressure to buy and be included has perhaps been a force for rising prices.
Found this useful?
Take a complimentary trial of the FOW Marketing Intelligence Platform – the comprehensive source of news and analysis across the buy- and sell- side.
Gain access to:
- A single source of in-depth news, insight and analysis across Asset Management, Securities Finance, Custody, Fund Services and Derivatives
- Our interactive database, optimized to enable you to summarise data and build graphs outlining market activity
- Exclusive whitepapers, supplements and industry analysis curated and published by Futures & Options World
- Breaking news, daily and weekly alerts on the markets most relevant to you
