\n\tBy Andrew Nelson<\/p>\n
\n\tWith the holiday break approaching and given signs of economic improvement in China and the US, short covering in the Australian market has continued to pick up pace as the year draws to a close. The sector affected most by this year-end covering is the Resources sector, while short positions in Retail and Materials stocks continue to build.<\/p>\n
\n\tShort positioning in Rio Tinto ((RIO)) is at a record low at 2%, having fallen all the way from 6.5% in the beginning of the year. Meanwhile, shorts in other sector names such as Alumina ((AWC<\/span>)), Discovery Metals ((DML<\/span>)), Independence Group ((IGO<\/span>)), Lynas<\/span> ((LYC<\/span>)), Mirabela<\/span> Nickel ((MBN<\/span>)) and OZ Minerals ((OZL<\/span>)) have also been covered to a lesser extent over the past few months.<\/p>\n \n\tConversely, David Jones ((DJS)) and Harvey Norman ((HVN<\/span>)) continue to see their already significant short positions extended, although analysts at CIMB<\/span> note Metcash<\/span> ((MTS<\/span>)) is largely to blame for the overall increase in the Staples sector, with short interest increasing 2.82 percentage points (ppt<\/span>) from 6.72% to 9.54%, posting the biggest short position increase in the Australian market over the course of the last month to 4 December. The stock remains positively regarded in the FNArena<\/span> Database, with two Buys five Holds and a Sell call. One of the Buys was posted by Credit Suisse, the broker upgrading its view on valuation grounds, believing the stock is just too cheap. BA-Merrill Lynch sit on the Sell side, noting rising costs and a continued loss of share to major retailers is a trend that is expected to continue.<\/p>\n \n\tShort interest in the Capital Goods sector has also continued to buck the covering trend, doubling in the past six months on steady increases in Bradken<\/span> ((BKN<\/span>)) and UGL<\/span> ((UGL<\/span>)). The building interest in Bradken<\/span> sees it sitting at the number two spot for monthly short interest, its position rising 2.06ppt from 4.74% to 6.80%. Despite the shorting, the stock remains well regarded in the FNArena<\/span> Database, with five Buy calls and two Holds recorded. Declining visibility in the order book and an expectation for a further softening in capital products demand over the next few months are likely taking a toll.<\/p>\n \n\tWhile there were only two significant (+\/- 2%) monthly increases to short positions, there were four stocks that saw their position covered significantly. The biggest bit of covering was seen by Lynas<\/span> Corp, whose short position has pulled back 4.95ppt from 13.14% to 8.19%. The stock remains positively regarded in the database, with two Buys, two Holds and a Sell. One of those Buy calls is from Macquarie, who upgraded from Sell a couple of weeks back noting the first rare earth ore from WA has landed at the LAMP in Malaysia and is ready to be fed in. The stock currently trades at a 66% discount to its consensus price target.<\/p>\n \n\tLynas<\/span> requested a trading halt yesterday to provide the company to comment on media reports suggesting the Malaysian government had insisted the company export its radioactive waste. The reports risked implying the LAMP temporary operating licence<\/span> would thus again be revoked but an announcement from the company has since confirmed there is not threat at this stage.<\/p>\n \n\tSingTel<\/span> ((SGT<\/span>)) has also seen a busy bout of covering over the past month, its short position down 4.3ppt from 7.09% to 2.79%. Analysts seemed to have relaxed a bit since the in-line quarterly last month, with Credit Suisse upgrading to Buy on a more positive view on the group’s Bharti<\/span> business in India. Sentiment is high, with the database showing four Buys and three Holds.<\/p>\n \n\tNext on the monthly decrease list is Fairfax ((FXJ<\/span>)), whose short position has pulled back by 4.03ppt from 16.08% to 12.05% despite a broadly negative view on the stock. The database shows four Sells versus two Buys and a Hold, although there is 10% upside to the current consensus price target. Credit Suisse, who re-initiated coverage on Fairfax with an Underperform<\/span> rating two weeks ago, notes the company needs to generate additional revenue streams to support its flagging publishing operations over the medium-term.<\/p>\n \n\tMesoblast<\/span> ((MSB<\/span>)) is our last significant monthly mover, its short position coming off 3.37ppt from 6.29% to 2.92%. Analsyst<\/span> sentiment remains positive, with the database showing two Buys, one Sell and one Hold and more than 29% upside to the consensus price target. BA-Merrill Lynch noted last month there is likely to be significant upside from phase III trial of the company’s Congestive Heart Failure treatment when it is eventually undertaken.<\/p>\n \n\tSignificant moves on a weekly basis were even fewer, as traders look to wind down activities ahead of the holiday break. Not a single stock saw it’s short position increase by 2ppt<\/span> or more from 27 November to 4 December. The biggest weekly increase was a 1.51ppt lift in Metcash<\/span> from 8.03% to 9.54%. Fellow retailer JB<\/span> HiFi<\/span> ((JBH<\/span>)) also rates a mention, its short position advancing 1.45ppt from 21.55% to 23% over the course of the week. The move has further cemented the stocks number one position on the Top 20 most shorted list, with a big gap of daylight between it and number two, Myer ((MYR<\/span>)) at 14.98% shorted.<\/p>\n \n\tThe biggest weekly decrease in short position was booked by Fairfax, down 3.58ppt from 15.63 to 12.05. The move sees the stock drop from the number two to number five spot on the Top 20 list. Next in line is Mesoblast<\/span>, its short position pulling back 3.50ppt from 6.42% to 2.92%.<\/p>\n \n\tThe was one compositional change to the Top 20 list, with Boral<\/span> ((BLD<\/span>)) falling off from the number 20 spot to be replaced by Linc<\/span> Energy, which joins at number 19. There were a couple of other decent sized position changes other than Fairfax. Metcash<\/span> rose from number 14 to the number 9 spot, while Lynas<\/span> Corp went the other way, going from 9 to 14.<\/p>\n \n\tAs always, CIMB<\/span> has been keeping an eye on short position movement in order to find a few good trading ideas. This week the broker looked at Qantas ((QAN<\/span>)), noting short positions continue to be covered and are now at their lowest level since August 2012. CIMB<\/span> Transport analyst, Mark Williams, expects to see a strong rebound in earnings in FY13<\/span>, given FY12<\/span> was affected by industrial action d a number of cost-saving initiatives. The stock remains the broker’s top pick in the Transport sector.<\/p>\n \n\t <\/p>\n\n\tTop 20 Largest Short Positions<\/h2>\n
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\n \n\t\t\t\tRank<\/td>\n \n\t\t\t\tSymbol<\/td>\n \n\t\t\t\tShort Position<\/td>\n \n\t\t\t\tTotal Product<\/td>\n \n\t\t\t\t%Short<\/td>\n<\/tr>\n \n \n\t\t\t\t1<\/td>\n \n\t\t\t\tJBH<\/span><\/td>\n \n\t\t\t\t22737915<\/td>\n \n\t\t\t\t98850643<\/td>\n \n\t\t\t\t23.00<\/td>\n<\/tr>\n \n \n\t\t\t\t2<\/td>\n \n\t\t\t\tMYR<\/span><\/td>\n \n\t\t\t\t87379429<\/td>\n \n\t\t\t\t583384551<\/td>\n \n\t\t\t\t14.98<\/td>\n<\/tr>\n \n \n\t\t\t\t3<\/td>\n \n\t\t\t\tILU<\/span><\/td>\n \n\t\t\t\t58160838<\/td>\n \n\t\t\t\t418700517<\/td>\n \n\t\t\t\t13.89<\/td>\n<\/tr>\n \n \n\t\t\t\t4<\/td>\n \n\t\t\t\tFLT<\/span><\/td>\n \n\t\t\t\t12613456<\/td>\n \n\t\t\t\t100160128<\/td>\n \n\t\t\t\t12.59<\/td>\n<\/tr>\n \n \n\t\t\t\t5<\/td>\n \n\t\t\t\tFXJ<\/span><\/td>\n \n\t\t\t\t283518377<\/td>\n \n\t\t\t\t2351955725<\/td>\n \n\t\t\t\t12.05<\/td>\n<\/tr>\n \n \n\t\t\t\t6<\/td>\n \n\t\t\t\tHVN<\/span><\/td>\n \n\t\t\t\t117522759<\/td>\n \n\t\t\t\t1062316784<\/td>\n \n\t\t\t\t11.06<\/td>\n<\/tr>\n \n \n\t\t\t\t7<\/td>\n \n\t\t\t\tDJS<\/td>\n \n\t\t\t\t57474481<\/td>\n \n\t\t\t\t531788775<\/td>\n \n\t\t\t\t10.81<\/td>\n<\/tr>\n \n \n\t\t\t\t8<\/td>\n \n\t\t\t\tTRS<\/span><\/td>\n \n\t\t\t\t2686232<\/td>\n \n\t\t\t\t26092220<\/td>\n \n\t\t\t\t10.30<\/td>\n<\/tr>\n \n \n\t\t\t\t9<\/td>\n \n\t\t\t\tMTS<\/span><\/td>\n \n\t\t\t\t84009318<\/td>\n \n\t\t\t\t880704786<\/td>\n \n\t\t\t\t9.54<\/td>\n<\/tr>\n \n \n\t\t\t\t10<\/td>\n \n\t\t\t\tPDN<\/span><\/td>\n \n\t\t\t\t74660924<\/td>\n \n\t\t\t\t836825651<\/td>\n \n\t\t\t\t8.92<\/td>\n<\/tr>\n \n \n\t\t\t\t11<\/td>\n \n\t\t\t\tCOH<\/span><\/td>\n \n\t\t\t\t4922736<\/td>\n \n\t\t\t\t57026689<\/td>\n \n\t\t\t\t8.63<\/td>\n<\/tr>\n \n \n\t\t\t\t12<\/td>\n \n\t\t\t\tCSR<\/td>\n \n\t\t\t\t42932103<\/td>\n \n\t\t\t\t506000315<\/td>\n \n\t\t\t\t8.48<\/td>\n<\/tr>\n \n \n\t\t\t\t13<\/td>\n \n\t\t\t\tLYC<\/span><\/td>\n \n\t\t\t\t156864554<\/td>\n \n\t\t\t\t1916159363<\/td>\n \n\t\t\t\t8.19<\/td>\n<\/tr>\n \n \n\t\t\t\t14<\/td>\n \n\t\t\t\tSLR<\/span><\/td>\n \n\t\t\t\t18243738<\/td>\n \n\t\t\t\t225493476<\/td>\n \n\t\t\t\t8.09<\/td>\n<\/tr>\n \n \n\t\t\t\t15<\/td>\n \n\t\t\t\tAWC<\/span><\/td>\n \n\t\t\t\t183873928<\/td>\n \n\t\t\t\t2440196187<\/td>\n \n\t\t\t\t7.54<\/td>\n<\/tr>\n \n \n\t\t\t\t16<\/td>\n \n\t\t\t\tTEN<\/td>\n \n\t\t\t\t103157837<\/td>\n \n\t\t\t\t1437204873<\/td>\n \n\t\t\t\t7.18<\/td>\n<\/tr>\n \n \n\t\t\t\t17<\/td>\n \n\t\t\t\tWSA<\/span><\/td>\n \n\t\t\t\t12353365<\/td>\n \n\t\t\t\t179735899<\/td>\n \n\t\t\t\t6.87<\/td>\n<\/tr>\n \n \n\t\t\t\t18<\/td>\n \n\t\t\t\tBKN<\/span><\/td>\n \n\t\t\t\t11516548<\/td>\n \n\t\t\t\t169240662<\/td>\n \n\t\t\t\t6.80<\/td>\n<\/tr>\n \n \n\t\t\t\t19<\/td>\n \n\t\t\t\tLNC<\/span><\/td>\n \n\t\t\t\t33942549<\/td>\n \n\t\t\t\t504487631<\/td>\n \n\t\t\t\t6.73<\/td>\n<\/tr>\n \n \n\t\t\t\t20<\/td>\n \n\t\t\t\tMND<\/span><\/td>\n \n\t\t\t\t6077471<\/td>\n \n\t\t\t\t90663543<\/td>\n \n\t\t\t\t6.70<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n