CBA’s gross shorts as a percentage of daily volume reached 75 per cent on Thursday. On the same day ANZ’s gross shorts as a percentage of daily volume was 41 per cent, NAB’s was 55 per cent and Westpac’s reached 51 per cent.
After shedding about 1 per cent each on Thursday, bank stocks eased at the open and continued to fall until they staged a late-afternoon recovery. At the close on Friday ANZ was down 0.4 per cent, CBA was down 0.2 per cent and NAB was down 0.3 per cent. Westpac bucked the trend after spending the morning in the red and closed up 0.1 per cent.
Struggled to gain traction
Macquarie’s analysts, however, see a silver lining in the build up in short interest, explaining that a benign final report from Commissioner Hayne may result in a short squeeze or spike in share prices, as speculators who are short the stock are forced to buy it back during a rally, sending prices even higher.
Data collected by Macquarie shows that domestic institutions and retail investors have been net buyers of bank stocks at the same time as offshore investors sold or went short. Local institutions have loaded up on CBA and to a lesser extent NAB, potentially for the sector-leading dividend yield of 11.8 per cent grossed up for franking.
Offshore investors have been harder to lure in and have been net sellers of Australia’s big four bank stocks, with NAB being the bank stock most sold by overseas funds. Overseas funds have also sold off ANZ and CBA while being net buyers of Westpac.
Macquarie says that the bank’s share prices have been supported by its private shareholder base with retail shareholders moving from net sellers in the September quarter to net buyers in the December quarter.
NAB shares saw the most buying of the big four according to Macquarie, with retail investors also prepared to shell out for regional bank stocks such as Bendigo and Adelaide Bank and Bank of Queensland.
Shares in NAB have been the most heavily sold off of the big four banks over the last 12 months as its reputation took a battering at the Hayne royal commission and its strategy to slim down and simplify the bank struggled to gain traction. NAB shares are down 23 per cent from their 52-week high.
Westpac, which has stated that it remains wedded to its troublesome financial advice business while its rivals have moved to sell theirs, is right behind NAB in the sell-off stakes with its shares 22 per cent off its year highs. ANZ, meanwhile, is 18 per cent lower and CBA is just 14 per cent lower.
Outside the big four banks, AMP is one of the more heavily shorted financial stocks with 45.5 per cent of daily trading volume shorted on Thursday. AMP rose 0.9 per cent in early trade on Friday, but by the close it was down 0.9 per cent. AMP is down 59 per cent from its 12 month high.