Stock Short Sales at 2-Year Low, Data Explorers Says
By Nikolaj Gammeltoft - Jul 26, 2010 1:28 PM CDT
Investors are exiting bearish bets on global equities, pushing bullish wagers on stocks to a two- year high versus short sales, according to Data Explorers.
The firm’s long-short ratio has risen to 9.5, having surged from 5.75 in September 2008 when Lehman Brothers Holdings Inc.’s collapse intensified the financial crisis, the London- and New York-based securities-research company said. The reading is the highest of the data that goes as far back as July 2008.
Stocks have rebounded worldwide following higher-than- estimated profit at companies from Adidas AG to Citigroup Inc. and Advanced Micro Devices Inc. The MSCI World Index of shares in 24 developed nations has risen 8.4 percent in July after losing 13 percent between March and June. U.S. equities had posted the biggest rally since the Great Depression.
“Short sellers are now taking money off the table,” said Will Duff Gordon, a senior researcher at Data Explorers in London. “Perhaps the bears are going back into hibernation?”
Short selling is the sale of borrowed stock in the hope of profiting by buying the securities later at a lower price and returning them to the shareholder. The Data Explorers gauge divides the value of stock available for lending from investment firms by the amount borrowed by short sellers.
19-Month High
The Data Explorers ratio has risen from less than 8 in April. The S&P 500 reached a 19-month high on April 23 before falling 16 percent through July 2 amid concern economic growth in the U.S. and China is slowing.
The S&P 500, the benchmark measure of U.S. equities, has rallied 8.7 percent since July 2. More than 83 percent of the companies in the index that have reported results since July 12 have beaten the average analyst profit estimate. The International Monetary Fund boosted its forecast for 2010 global growth to 4.6 percent from 4.2 percent on July 8 after a stronger-than-expected first half. That would be the largest gain since 2007.
Equities rose today, erasing the Dow Jones Industrial Average’s 2010 loss, after new-home sales beat the median economist estimate and FedEx Corp. raised its profit forecast.
Barton Biggs, the hedge fund manager who sold half his equity holdings at the start of July, said today that signs the U.S. economy will avoid a recession spurred him to build the stakes back up.
Biggs, whose Traxis Partners LLC gained 38 percent in 2009 when he bought shares as the Standard & Poor’s 500 Index fell to a 12-year low, said bets that stocks will advance make up 75 percent of his fund, up from about 35 percent three weeks ago. Biggs said on July 2 that concern governments around the world would curtail stimulus measures too soon led him to sell almost all of his U.S. technology holdings.
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
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