Yes, a surge in the demand for annuities will likely require a capital injection, but the corresponding book growth will then entail a surge in profits. Therefore, shorting CGF on that basis doesn’t make sense.
On the other hand, a sharp decline in asset values not accompanied by a devaluation of annuity liabilities (as could be the case in the event of large-scale defaults in the bond portfolio) would force CGF to raise capital without a simultaneous increase in earnings.
But, if that is the rationale for shorting, there are much smarter ways of doing it. For instance, one could buy protection on a credit index using credit default swaps: by doing that, the shorters would at least know what it is exactly that they’re shorting (whereas the details of CGF’s bond portfolio aren’t public).
Or they could just buy out-of-the-money put options on an equity index.
Don’t you think?
Yes, a surge in the demand for annuities will likely require a...
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Last
$6.89 |
Change
0.020(0.29%) |
Mkt cap ! $4.761B | |||
| Open | High | Low | Value | Volume |
| $6.95 | $6.99 | $6.88 | $7.286M | 1.052M |
Buyers (Bids)
| No. | Vol. | Price($) |
|---|---|---|
| 1 | 1818 | $6.89 |
Sellers (Offers)
| Price($) | Vol. | No. |
|---|---|---|
| $6.90 | 13335 | 3 |
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| Last trade - 16.10pm 12/07/2024 (20 minute delay) ? |
| CGF (ASX) Chart |