director of research, Astec Analytics, SunGard's capital markets business

THE LATEST IN SECURITIES LENDING: JULY 13, 2011

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Short interest in the U.S. has been making a comeback over the past few months and securities lending activity has been doing the same. U.S. equity securities lending volume rose from $350 billion in April to $400 billion as of July 11, 2011. Average borrowing cost for U.S. equities has also increased, from 50 basis points to 70 basis points over the same time period, so this is good news for lenders and an indication of increased demand to short.

Short interest was up specifically from June 1 to June 15. See an excerpt from the following Wall Street Journal article about the topic.

Bearish Wagers Increase on NYSE, Nasdaq

Short selling rose at the New York Stock Exchange and the Nasdaq Stock Market during the first half of June. “Semiconductors is the most heavily shorted sector for the past week due to short sellers betting against several solar companies,” said Andrew Shinn, director of research at SunGard’s Astec Analytics unit in New York.

According to Astec, an interesting stock to watch is Star Scientific. “The cost to borrow the stock has tripled over the past three weeks and 92% of available shares have already been borrowed, so short sellers will need extra conviction to stay in the trade,” said Mr. Shinn.

Mr. Shinn said three stocks have become targets of short sellers over the past two weeks: Sino Clean Energy, China Valves Technologies and Harbin Electric.

While the beginning of the month was up, we saw a drop in short interest in the second half of June. Read this article from the Wall Street Journal to see the latest.

Bearish Bets Fall at NYSE, Nasdaq

In the latest twice-a-month statistics from the exchanges, for the period ended June 30, the number of short-selling positions at the NYSE not yet closed out, known as short interest, declined 0.4%. The positions stood at 13.44 billion shares from a revised 13.49 billion shares in the period ended June 15.

On Nasdaq, short interest decreased 2%, to 7.17 billion shares from 7.31 billion shares, over the same period.

According to SunGard Astec Analytics, the most expensive sectors to short over the past week were: semiconductors, retailing, transportation, software and services, and energy.

“Short sellers have been aggressively shorting LinkedIn and RealD as shown by the increase in securities-lending activity,” said Andrew Shinn, director of research at Astec in New York. “This shows that many investors have not bought into the hype surrounding these stocks.”


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