Investor sentiment towards Japan and Asia
Despite reports that China has eclipsed Japan as the world’s second largest economy, there have been some positive reports about the prospects for Japan’s stock market. Global investors will be keen to ensure they do not “miss” a rebound in fortunes for this country. We will outline investor sentiment in Japan and Asia and highlight the following companies: Resona Holdings (TSE:8308), Yorozu (TYO:7294), Akebono Brake (TYO:7238), Sanden (TYO:6444) and TBK (TYO:7277), Eva Airways (TWSE:2618), China Airlines (TWSE:2610), Unihair (TYO:8170), Tencent Holdings (HSE:0700) and All Nippon Airways (TYO:9202).
The Nikkei 225 is up just under 3% year to date and one wonders if this is due to short covering? The answer is only to a small degree. Some heavily borrowed names like Resona Holdings have reduced to normal levels and in this case, it was a capital raising rather than a directional short that led to short interest rising to 12% of total shares outstanding on loan.
The overall level of short selling is little changed in Japan. The Data Explorers LongShort Ratio shows there is around 10 times more availability than there is stock on loan. However, this was nearer 11 times a year ago, reflecting increased negative investor sentiment.
We denote negative sentiment when funds who lend are reducing their holdings and the demand to borrow is rising at the same time. Looking at investor flow by sector, we see that Automobiles & Components is currently showing the most negative sentiment this year. Yet, it is not the major car manufacturers showing rising short interest, but smaller players like Yorozu, Akebono Brake, Sanden and TBK. The only commonality here is brake manufacturing, since TBK does this too. Is there some new technology on the horizon that will impact these companies? A Hong Kong listed stock in this sector that shows rising short selling is Great Wall Motor Co which shows 2% of its total shares being out on loan.
Another sector where the trading sentiment is more negative than positive is Household & Personal Products. This is mainly due to receding profits at a hair piece and wig maker called Unihair.
If we look at the rest of Asia for highlights, we see a story emerging at Hong Kong’s Tencent Holdings. 15m shares were borrowed in late January taking the short interest to 2.5% of total shares in a firm that has been doing very well at selling internet and mobile services into China. Could this reflect investor nervousness about a slow-down in profit growth?
It is not plain sailing in the Transport sector in Asia. A couple of Taiwan listed airlines are showing increased short selling, notably Eva Airways and China Airlines. Over in Japan, All Nippon Airways has rising short interest to 3% of its total shares outstanding on loan.
It is worth noting that three emerging market ETFs appear in our list of top ten ETFs with the largest increase in new loans, with the Vanguard emerging markets ETF standing out.
