Those charts - thanks DimDim - had me worried that the 'smart money' is all selling, which makes me the 'dumb money' for buying.
Not a nice feeling - but the last couple of weeks has been a perfect storm for CRN, culminating last Friday, with at least three drivers for reduced institutional holdings:
- CRN's liquidity crunch, selling or shorting to reduce exposure or speculate on a default
- MSCI index demotion from Small to Micro, which gets them booted from MSCI-linked ETFs, including many of BlackRock's iShares funds
- AustralianSuper, L1 Capital or others dumping their dregs
However... I had a closer look at the MSCI index selldown, and there's a case to be made that this alone explains the bulk of the elevated volume at close on Friday.
There were a few ASX listings that were demoted together: CRN, JIN, JLG and RPL. Three of those had been held in MSCI-linked ETFs according to Fintel data: CRN, JIN and JLG. Roughly comparing the MSCI-linked ETF holdings, expected to be disposed of at close on Friday, and the total trade volume from Friday: | Ticker | ETF holding | Trade volume | Volume/Holding |
|---|
| 1 | CRN | 10M | 37.5M | 3.75x |
|---|
| 2 | JIN | 550K | 1.8M | 3.3x |
|---|
| 3 | JLG | 2.5M | 7.3M | 2.9x |
|---|
All three had unusually high trade volumes, but in similar proportion to the ETF holdings I identified. CRN is at the higher end, but it was also more heavily held in sector-specific funds.
The 'excess' volume on CRN, not easily attributed to the MSCI index rebalance, is under 10M shares. That's the same order of magnitude as a typical close in recent months.
The point I really want to make is, these index-linked sell volumes aren't driven by superior institutional 'smarts'. It's an almost completely mechanical process of sizing companies
by market cap to rebalance the index, resulting in holding weights which the ETFs blindly follow.
Those index-linked ETFs do tend to buy shares when they're overbought, and sell when they're oversold. That's the real 'dumb money'.
(20min delay)