The Big Picture THE BIG PICTURE: ARE BETS AGAINST UK PLC SET TO RISE?
THE STORY SO FAR: NET SHORT POSITIONS AGAINST UK PLC
2000 1800 1600 1400 1200 1000 800 600 400 200 0
Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Source: Financial Conduct Authority
With the UK believed to be heading for its worst recession in history and with little sign of a trade deal with the EU, Mona Dohle discovers that more and more investors are having little hope of an economic miracle.
The past 10 years have not been easy for hedge fund investors trying to make money on short bets. Although not to many people will be shedding tears for the millions of pounds they lost betting unsuccessfully against UK plc, the overheated stock market and creative accounting techniques at some firms might be a source of concern for institutional investors in UK- listed stocks.
Short bets increased by 25% year-on-year in the first half of 2020, suggesting that a growing number of investors believe another stock market correction might be on its way. By the end of May, there were 1,569 short bets over 1%, compared to
12 | portfolio institutional August 2020 | issue 95
1,255 the year before, according to GraniteShares. The Financial Conduct Authority’s daily register of short bets reveals that by late July, the firms attracting the most bears were property developer Hammerson, which has no less than 10 firms placing bets against its value, followed by Cineworld (8), Domino’s Pizza (7) and robotics firm Blue Prism (6). While many of these short bets were issued years ago, it is notable that investors have decided to increase their stakes in the first half of 2020, despite stock market valuations having largely recovered from their slump in March and April. When viewed by sector, investors seem to be particularly cautious on cyclical stocks, such as oil and gas extractors, miners and property developers, but retail giants and restau- rant groups have also attracted investor caution, suggesting a growing belief that another slump in consumption might be on its way.
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