broker report

I haven't done a report on what the brokers are doing in CNP and CER for a while, so after an earlier-than-usual start to my day (thanks to the local wildlife), I've got the numbers and had a look through.

I'll cross-post this to the CER forum as well as it contains data for both the Centro listed entities.

I have looked at data from 1st May upto and including this Monday (12th). The data I get is 3 days lagged which means Monday is the most recent I have detailed access to. Remember also that we were in TH for two days when no trades took place.

CNP

During the period, the retail brokers (Comsec, etrade and Westpac) absolutely dominated the action. In summary, a small number of insto brokers, JP Morgan, UBS, Pattersons and ABN Amro net-sold around 14m CNP shares to retail investors. In addition, there appears to have been extensive short-term trading by the clients of the 3 retail brokers.

A couple of the larger brokers (or their clients), like Aequis and Morrison, are also short-term trading the stock but nowhere near the level of the retail broker clients.

This has continued the trend we have seen for months now: insto brokers net-selling to retail clients AND retail clients and to a lesser extent large brokers, day-trading. During the period, Comsec clients alone bought and sold almost 181m shares.

Whilst I sense that the day-trading has died down in the last few days, we need to wake up to the fact that at this stage the stock is being dominated by DTs. There is no evidence to suggest that any insto is accumulating CNP in any great volume.

I suspect the instos are still sitting on the sideline to wait and see what happens. They will re-enter once certainty and stability is restored, but how soon this will be is unclear.

CER

The same cannot be said for CER. I have been saying for some time that the smart money has landed firmly with this stock which is also evidenced by the fact that the price has not been so volatile this month.

During the period, clients of Comsec were the biggest net SELLER of CER. I suspect this was retail clients who had loaded up pre-ann in the hope of a run, who then bailed out as the price dropped. Some of the larger brokers like JP Morgan and Macquarie appear to have been short-term trading. Goldman Sachs offloaded just over 2m shares, which is small in the whole scheme of things.

However, the big net-buyers were ABN Amro who net-bought over 6m shares during the period, and Morgan Stanley at just over 1m. In summary, the spooked retail sellers sold their shares to instos.

I don't have detailed data for the last two days (Tue / Wed) but the summary data shows this trend has continued and even extended. Credit Suisse, Goldmans, Deutsche and Morgan Stanley all represent the majority of volume.

When we look at this calendar year (1st Jan onwards), a pattern has emerged which suggest some of the instos have dominated trading and taken big positions for themselves or their clients: Deutsche 39.5m, Bell Potter 37m, UBS 18m, ABN 16m. UBS and Deutsche alone represent about 1/3 of the entire volume of CER traded since Jan. Add in Macquarie, JP Morgan and Goldman Sachs and the number is closer to 1/2.


So, after looking through the data, here are some thoughts of mine:

CNP

CNP has been and continues to be day-traded extensively. I believe we had a large number of speculators who took big positions pre-ann expecting a run. They have either already bailed, are about to bail or are hanging on for dear life.

Coupled with this though, people who have been with CNP for a while have developed an emotional attachment to the stock and probably know quite a bit about the fundamentals. You know who you are. They may have sold down but they are watching closely and because of their attachment, still believe it will run like the wind and will be prepared to re-enter when it does. We also have a lot of DTs who are ready to jump on CNP at the first sign of a quick buck

The outlook for CNP is a little bleak short-term but I reckon that when sentiment changes, it will fly. If there is a reason for the instos to return it may go supersonic.

CER

This is where the smart money is playing. There is less volatility and the price is being propped up by insto buying. I truly believe that any retail client who has sold out of CER will be kicking themselves in the long term. We saw Orbis take a sub holder a while back and I sense that we are already seeing value investors accumulating this stock, which certainly gives me a level of comfort.

On a fundamental level, even if CNP dies and Super LLC goes with it, there is a big enough margin of safety in CER to mean it still has a lot of upside. The smart players knew this a long time ago.