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Trying to Make Sense Bursa Investments

Author: Ben Tan   |   Latest post: Sun, 7 Mar 2021, 4:53 PM

 

Is the Big Gloves Short Over?

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On January 5 (Tuesday), I wrote an article called "The Big (Gloves) Short", refering to the enormous short position that was opened on Monday on the publicly traded stock of Top Glove, Hartalega, Kossan, and Supermax. The short selling continued on for 2 weeks, subsiding slightly only on January 12 and January 13 (Tuesday and Wednesday). On Friday (January 15), the total value of the short positions opened on the 4 stocks reached RM2,003,029,511. This is suspiciously close to exactly RM2 billion, and we can easily imagine the excess of a little over RM3 million may belong to retail or third-party short positions, unrelated to the big short position. Thus, we can probably start considering the possibility that the selling side of the short selling exercise might be over.

The attack on the stock prices was divided in the following major phases:

Monday (January 4) - opening of the largest short portion of the short position of a total value of RM924,634,847 (appx. RM925 million), representing 46.16% of the total short position open during the last 2 weeks.

Week 1 (January 4-8) - total short sales for the week equal to RM1,698,795,008; excluding the Monday shorts - RM774,160,161 (appx. RM775 million), or 38.64% of the total short position open during the last 2 weeks.

Week 2 (January 11-15) - total short sales for the week equal to RM304,234,503 (appx. RM300 million), or 15.19% of the total short position open during the last 2 weeks.

Below is a table of the total value of the short positions on each of the 4 glove stocks, and the total volumes of short sales for the period:

Company Total Volume (# shares) Total Value (RM) Average Short Price (RM)
TOPGLOV 216,576,800 1,228,818,347 5.6738
HARTA 42,732,000 470,535,170 11.0113
KOSSAN 54,281,200 223,060,545 4.1094
SUPERMX 14,113,800 80,615,449 5.7118

 

The Average Short Price in the table is the average price at which the stock has been shorted. It can also be seen as the basic break-even price for the short seller, i.e. the break-even price without considering any fees they might have paid (or they might yet have to pay) to the lender of the shares, brokerage fees, arrangement costs, etc. We of course don't have information on those extra costs, so we will calculate the profit/loss of the short seller(s) based on these average prices and the minimal price they would have to pay if they wanted to buy back the shares on Monday morning (i.e. at the closing prices as of Friday):

Company Average Short Price Market Price Profit/Loss per Share Total Profit/Loss (RM)
TOPGLOV 5.6738 6.42 -0.7462 -161,609,608
HARTA 11.0113 12.20 -1.1887 -50,795,528
KOSSAN 4.1094 4.22 -0.1106 -6,003,500
SUPERMX 5.7118 6.70 -0.9882 -13,947,257

 

So the current paper loss for the short seller(s) stands at RM232,355,893, or 11.6% of the value of the entire short position.

Thus, unless they are forced to, the short seller(s) might not want to close the short position on Monday. However, there are (at least) 3 factors that might force their hand:

1) Would it be viable to keep the short position open when the stock has actually risen in price (except for Kossan's) compared to the closing price from December 31, the last trading day before the shorting started? And this albeit the RM2 billion in short sales.

2) The upper limit of 4% for the net short position (i.e. the volume of shorted shares not bought back yet) specifically for Top Glove is approaching. According to the latest data published by Bursa the net short position on Top Glove stands at 2.80%, but that data lags by 1 day (see my explanation on that here). On Friday 1.5 million shares of Top Glove were shorted, so unless some part of the position has been closed, the net short currently stands at 2.82%, or 1.18% below the limit. The short position on Kossan, after Friday, likely stands at 2.14% of the company's outstanding stock.

3) The short seller(s) might not be able to find a willing lender of shares. At present, the short seller(s)'s best move appears to be to try one last massive attack, like the one from January 4, where they could cause panic sale, so that the market share prices could drop as much as possible. However, for some reason the short seller(s) have not done that yet, albeit the huge paper loss they are sitting on. One of the reasons might be precisely the inability to procure the necessary quantity of shares to execute on that plan.

In a nutshell, the short seller might currently be in a difficult position. If they do not continue shorting on a daily basis, the price may jump even more. But if they do continue to short, their losses are just going to continue rolling. Thus, closing quickly might be the best possible scenario, unless they hold a large volume of borrowed shares that they could short sell, and then buy back quickly after the market price tumbles down.

We will see how things play out next week.

Sources

Total Net Short Position for 04/01/2021

Total Net Short Position for 05/01/2021

Total Net Short Position for 06/01/2021

Total Net Short Position for 07/01/2021

Total Net Short Position for 08/01/2021

Total Net Short Position for 11/01/2021

Total Net Short Position for 12/01/2021

Total Net Short Position for 13/01/2021

Total Net Short Position for 14/01/2021

Total Net Short Position for 15/01/2021

Short Selling Trade Detail By Stock For 04/01/2021 to 08/01/2021

Short Selling Trade Detail By Stock For 11/01/2021 to 15/01/2021

Important disclaimer: Any views expressed are for informational and discussion purposes only. None of this information is intended as, and must not be understood as, a source of advice. It is imperative that you always do your own research and that you make any decisions based on your personal situation and your own personal understanding.

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Related Stocks

Chart Stock Name Last Change Volume 
TOPGLOV 5.25 +0.29 (5.85%) 42,665,900 
SUPERMX 4.50 +0.14 (3.21%) 27,346,300 
KOSSAN 3.85 +0.15 (4.05%) 7,764,500 
HARTA 9.75 +0.10 (1.04%) 5,370,500 

  10 people like this.
 
wbwanabe Ben, since you track the numbers so diligently, is it possible for you to track on EPF holdings once their loan shares were return plus any additional shares that EPF has added in during the period when they are under the radar?. It may seems to be an exercise in futility if the loan amount return is not stated as "return shares from SBL".
The reason I am requesting is because I noticed in the announcement sections, EPF can be a buyer and seller on the same day and it puzzles me no end. I always thought who in the right mind would buy and sell at the same time, makes no sense at all. Then now I think it makes perfect sense as in one hand they are selling down for their shorties (via SBL) and on the other hand they are buying what they are shorting. Hence any time shorties are throwing, EPF may be the one picking up these cheap shares. Implications from here would be :
- there would be support for the shares below a certain price
- EPF knowing the operations to selldown may be the biggest beneficiary cause they are now getting it at a cheaper price and would sell them in the open market. As such the shorties would have no choice but to buy at a higher price when the time has run out for them.
- this may work if the prospects are still good for the shares being shorted, example the glove counters. Looking at the current stock prices, ie still holding above 6 for TG and Smax may be an indication that the shorties are failing miserably in their attempt to short the Big 4
- be prepared for more "bad articles" or negative news since the shorties are so desperate
Possible?
18/01/2021 2:10 PM
Ben Tan wpwanabe, EPF is most certainly the biggest beneficiary from the entire exercise, because they are both able to pick up more shares at a lower price, and at the same time they receive a fee from the short seller for lending out their shares. Additionally, they may know better than anyone (other than the short seller) when exactly the short position is going to be closed, thus timing their actions in the best possible manner. It is precisely because the prospects for the glove counters are stellar that EPF has agreed to participate in this exercise.

I am following all of the public announcements, and trade volumes, including short selling volumes.
18/01/2021 3:38 PM
wbwanabe Thanks for all the hard work. Your write up is very thorough and I am sure help lots of newbies who are ignorant about RSS.
18/01/2021 5:16 PM
SteadyT @Ben Tan, based on your analysis, do you know what is the main reason that triggered the massive spike in glove share prices on the 8th of Jan? It couldn't be just MCO 2.0 news right?
18/01/2021 5:46 PM
Ben Tan wbwanabe, thank you, I hope it has benefited at least someone!

SteadyT, thank you for your comment.

It is hard to say if the spike in the share price of the glove counters was caused only by the MCO rumors or by something else. Certainly the rumors, which started around that week's Thursday, were a major catalyst though. It is possible that there might have been some fund outflow from bank stock into glove stock because of that reason.
18/01/2021 6:07 PM
tylee81 @ben tan,very thankful for your detailed explanation
18/01/2021 11:11 PM
Cescmy Thanks Ben for your insightful write up
18/01/2021 11:47 PM
Ben Tan tylee81 and Cescmy, thank you for your comments.

Let's just sit tight and observe.
19/01/2021 11:14 AM
SteadyT There is actually no way for us to find out who was the one that shorted right?
19/01/2021 1:40 PM
Ben Tan SteadyT, not any way that I know of. The only thing we know for sure is that on Monday (January 4), it was "foreign" participants on Bursa who initiated the biggest short sale:
https://klse.i3investor.com/files/my/blog/img/bl6707_capture_4.jpg
19/01/2021 2:00 PM
SteadyT I see. Even today 19/1, there is still 0 RSS done on Topglove. The attack shifted to Kossan. Is it because the shorties are worried that it will hit TG's 4% limit too fast?
19/01/2021 4:56 PM
Ben Tan SteadyT, if there is one thing that is special about Kossan, it is that it is the only stock in which the short position is not losing too much. They are trying to keep the price within a range around RM4.20, and they are apparently buying back the shares slowly. For instance, on Friday 1,770,145 shares have been bought back, i.e. about 3.25% of the short position (as of that time) has been closed.

This is the ideal scenario for the short seller - slowly suppressing the price by continuously selling short in order to curb any upward momentum, while at the same time slowly buying back on downtrends.
19/01/2021 5:25 PM
tylee81 @ben tan u have any idea hw long this rss will last?as we knw time is very crucial for them and they r racing with the time
19/01/2021 10:41 PM
Ben Tan tylee81, unfortunately there is no way to say. However, it is almost 100% certain that they cannot hold until after the dividend ex-date for the next quarter of any of the companies. The announcements for Supermax and Hartalega are coming very soon, so the short closing will likely happen within this month.
20/01/2021 8:45 AM
yong99 Thanks Ben for sharing this valuable information
20/01/2021 9:48 AM
tylee81 @ben tan, tqvm for ur replied
20/01/2021 11:30 AM
tylee81 @ben tan,ss has totally wrong targeted,i don't think they can persist if they continue to lose money.it's jst the matter of time when they will give up as more n more news has emerged e.g the rising of asp,tremendous co earnings,doubtful vaccine efficacy,spiking of virus etc,all this r bad to them.
20/01/2021 12:24 PM
Ben Tan yong99 and tylee81, thank you for your comments.

tylee81, there are currently certain suspicions circulating around that this is a classic "short and distort" campaign. The bad publicity on Top Glove in particular has certainly been way overblown and excessive, much beyond what would have normally been expected. Thus, it is really hard to predict anything right now.
20/01/2021 1:02 PM
SteadyT Hi again, can you elaborate more about the dividend ex-date part? The short sellers will have to pay for the dividend is it? Thanks!


@Ben Tan tylee81, unfortunately there is no way to say. However, it is almost 100% certain that they cannot hold until after the dividend ex-date for the next quarter of any of the companies. The announcements for Supermax and Hartalega are coming very soon, so the short closing will likely happen within this month.
20/01/2021 4:03 PM
Ben Tan SteadyT, yes, if the short seller doesn't return the shares to the original lender before the dividend ex-date, the short seller will have to cover the sum paid as dividend on those shares.
20/01/2021 4:13 PM
SteadyT But if the short sellers are borrowing the said shares, they should also receive dividend from the said company isn't it? So, the short sellers don't actually have to fork out their own money
20/01/2021 4:20 PM
Ben Tan SteadyT, the short seller will receive dividend only if they buy back the shares before the ex-date. That is exactly what I meant above - they have to buy back the shares before the ex-date.
20/01/2021 4:22 PM
tylee81 @ben tan that's the most interesting part,tks again
20/01/2021 4:28 PM
SteadyT Oh okay, it makes sense to me now, Thanks for the prompt explanation!!
20/01/2021 4:32 PM
SteadyT No wonder they don't really short Supermax a lot. As they will announce their QR very soon
20/01/2021 4:33 PM
tylee81 Even tg also won't last long as qr will out nxt month
20/01/2021 4:42 PM
tylee81 @ben tan,if tg release a bombastic QR do u think its possible shorter will continue short?
20/01/2021 4:55 PM
Anthem2 That's why the price manipulation for accumulation. If you trust in your valuation, just sit still and enjoy the comic relief in the forum. All that shouting and screaming is all just noise and it's proof something's brewing.
20/01/2021 5:00 PM
Ben Tan SteadyT, tylee81, Anthem2, thank you once again very much for your comments.

SteadyT, yes, that might be one of the reasons for why the attack on Supermax is not as massive. However, I believe the more important reason is that institutional investors don't have as large positions in Supermax's stock, as they do on TG, Harta, or Kossan. EPF and KWAP are not among the top 25 shareholders of Supermax, and the 25th (RHB) holds only 0.28% of the stock.

tylee81, I think the short seller will close their position long before the release of TG's quarterly results in March.

Anthem2, certainly right now would've been the best period for such a short attack. The only thing that disrupted the plans was MCO2.0
20/01/2021 6:36 PM
tylee81 @ben tan,my grateful for ur answered,as I'm a newbie,i have one last question hope u can answer.
The amount of money use to share buy back is huge compare to the dividend payout,instate of using such a big lump sum to buy back will they rather folk out they own money as a dividend pay out to pay to the lender?
20/01/2021 7:59 PM
bullpiano Thank you very much for Bro. Ben Tan. Thanks for all the hard work.

4/Jan
TG Open RM:6.10 Close:RM5.50
Shortist had to spend RM573.22 mil with 106mil shares to bring down TG by RM0.60
Shortist average cost was RM5.40

Up to date, shorties had spend RM1.241 bil with average selling price of RM 5.247 ( not considering some position that had been closed)

Assuming that shortist TP is RM4.247 to make RM1.00 (19%) profit.
How many shares do they need to short in order to hit the TP?
By Bursa rule maximum Net Short Position is 4%
As on 18/Jan, TG Net Short Position 2.76%.
Room for shortist is 4% - 2.76% = 1.24% = 103 mil shares
But today (20/Jan) TG closing price is RM6.14, isn’t that shortist have very limited room to push down until hitting the TP price?
Do shortist have other strategy to press down the price?
20/01/2021 10:37 PM
bullpiano By calculating RSS data released by Bursa, below is the TG short sell that had been closed daily.


18/Jan -5000000
15/Jan 0
14/Jan -32300
13/Jan 0
12/Jan 0
11/Jan -3680900
8/Jan -29100
7/Jan -10900
6/Jan 0
5/Jan -12000
4/Jan -28000
20/01/2021 10:50 PM
Anthem2 On the 18th TS Lim and his family bought 10 Lots each??? Anyone knows what gives? Some sort of warning?!
20/01/2021 11:40 PM
DickyMe Gloves not required, Ismail Sabri says..
20/01/2021 11:40 PM
lkoky 19 & 20 RSS is net buying
21/01/2021 8:35 AM
Ben Tan tylee81, if the short seller has to pay the dividend to the borrower of shares, that's pure loss. Currently they sit on massive paper losses, but these are still just paper losses.

bullpiano, the small figures for Jan 4th, 5th, 7th, 8th, and most likely 14th, are not related to the big short. They are probably retail positions or other type of positions. As mentioned in the article, probably about RM3 million in value does not belong to the big short position, but to other small/retail short positions. However, yes, there has been some closing of short positions. The following are the amounts for each of the 4 counters:

19 January - 5,955,218 TG shares bought back
19 January - 1,000,000 Kossan shares bought back

18 January - 5,000,000 TG shares bought back
18 January - 3,000,000 Kossan shares bought back

15 January - 1,770,145 Kossan shares bought back

11 January - 3,680,900 TG shares bought back

No closing of short positions on Supermax or Harta has been observed so far.

Anthem2, the announcement say that the acquisitions are via "TS Dr Lim WC (L) Foundation", so I assume it's a sort of a foundation set up by LWC to reward the founders of the company. It's a really small amount (0.00001% of the company stock), so it's truly immaterial.

DickyMe, thank you for letting me know. This information is truly immaterial to the earnings potential of any of the big glove manufacturers.

lkoky, if the figures show net buying, this may still mean that some of the older short positions have been closed - as has been the case with Kossan last Friday, and this week on Monday and Tuesday so far (we have no up-to-date data for Wednesday).
21/01/2021 9:51 AM
bullpiano Ben Tan, noted. Thank for the sharing.
21/01/2021 9:58 AM
tylee81 @ben tan,i get ur note,once again I'm grateful for ur patient explanation,million tks.
21/01/2021 9:58 AM
Anthem2 Tks Ben for pointing out that detail that was missed.
21/01/2021 10:50 AM
SteadyT @Ben Tan, despite multiple local IBs giving glove companies good comments recently, price is still dropping, can clearly see someone manipulating the sell queue of topglove just now. Do you think the price will rebound at this rate?
21/01/2021 12:46 PM
SteadyT Feel like giving up already
21/01/2021 12:46 PM
Ben Tan SteadyT, basically these are rock bottom market valuations right now. As I've said elsewhere, the price can pretty much only go upwards from here. However, if it will happen tomorrow, next week, or next month, might be a bit harder to say.

What is certain is that the short selling pressure should be over by the beginning of February at which point the bigger part of the short position will have to be closed, which of itself will result in the prices going up.
21/01/2021 1:51 PM
goldenluck16 Yes, @Ben Tan , I totally agree with your view.
21/01/2021 5:38 PM
tylee81 @ben tan,there is very important for the fund to support this sector either local or foreign,but currently it seems like lack of fund support,what is your view?
21/01/2021 10:21 PM
CJkenho @tylee81.. with you on that thought too. Seems to feel like our local IB is waiting & waiting for the foreign fund to flow in (to help) pump up the-usually-big primary wave 3. I believe it's all a matter of like "being in the sales biz". You want others to buy into your country's stocks, u've gotta make it so attractive & irresistible, like it is with all glove counters now (unlike 6 mths ago).

Unfortunately, all the IB's hardwork of 6mths retracement is put to jeopardy by our beloved politicians who just can't stop destroying our country's economy. If miraculously we could somehow discover the amount of foreign money that wanted to come in but reversed... we'll all be crying bucket loads.
21/01/2021 11:01 PM
tylee81 @cjkenho,in such a bad economic sentiments only glove sectors manage to make a bombastic earnings and with an attractive DY paid out.furthermore currently there are big 3 listed on klse,which means that it is difficult for index to reached higher by yr end with the laggard of big3.with such an attractive and good conditions it is mpossible and no point for fund to ignore it,and v all knw that glove shortage might last till 22 or 23.hopefully @ben tan can give some of his view.
21/01/2021 11:44 PM
Ben Tan goldenluck16, tylee81, CJkenho, thank you once again for your comments.

tylee81 and CJkenho, my opinion is that like us, the local IBs are currently in a waiting position. They are waiting to see what the short seller is going to do next. On January 4, when the short seller unloaded the largest amount of sales, the prices plummeted. If such a thing happens again, that would be an incredible buy opportunity. Everyone likely has their guns loaded for when/if that happens.
22/01/2021 10:44 AM
ruby20 Everyone who owns gloves, plan to trade / invest in gloves should watch this highly informative video discussion. Haven't seen anything better.

https://www.youtube.com/watch?v=kvZLCpAubRk&t=6979s

"Gloves on or Gloves Off"

The video tells u everything about covid, covid mutations, vaccine and its challenges, RSS and short covering and intrinsic value of top 4 in 2023.
23/01/2021 1:13 PM
Ben Tan ruby20, thanks for sharing. Please see your private message here when you get the chance.
23/01/2021 1:15 PM
CJkenho https://klse.i3investor.com/insider/substantialShareholderNoticeOfInterest/7113/26-Jan-2021/13978_2666436078.jsp

@Ben Tan, so with this the shorties have closed at least half of their position by now? Coz total that was loan out was 40mil rite..?
26/01/2021 8:46 PM


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