@donnyk01Thinking about it, it probably makes more sense to look at the short positions in absolute dollar amounts, rather than in percentage terms; then the ranking becomes as follows:
CBA: 2.42bn$
WBC: 1.43bn$
ANZ: 0.75bn$
AMP: 0.43bn$
CGF: 0.41bn$NAB: 0.34bn$
IFL: 0.17bn$
So, it would appear that the banks
are the most shorted, after all (which makes sense).
One possible explanation is that the whole Australian financial sector is being shorted, whether it is because of the housing cycle, of the RC, of the China slowdown, or maybe all of these concerns together. And the smaller names, simply because of market cap constraints, end up being shorted
more, as a percentage of their total outstanding shares.
I realise this may come across as a bit of a naive interpretation, given the very company-specific problems that some of these names have been experiencing (see AMP and IFL, for instance), but it may not be too far from the truth.
The “big end of town” (a.k.a. the sell side) have a penchant for pitching “thematic trades” (such as shorting the whole Australian financial sector) to their clients, and some of them (long/short equity funds or multi-asset hedge funds) do trade on those recommendations. I am not saying that’s all it is, but it may be a non-insignificant part of it.
As for the shorters being well-researched and knowledgeable: sure, they may well be; but, so far, I personally haven’t encountered a single piece of research that makes a solid short case for CGF, or that cogently values CGF below its current market cap.
Besides, I can think of companies in the mining services sector (MND comes to mind), that were heavily shorted at their lows in 2015/2016 and have trebled in price since. So, shorters do get things wrong big time, in some instances.
To conclude, I wouldn’t lose sleep on CGF just because the price action is weak and the short position is getting bigger.
As you said, the combination of RC findings and half-year results in February (only a month away) should provide a lot more clarity.
(20min delay)