No summer lull for securities lending in Sweden

The recent market turmoil has threatened to derail the global recovery and recent economic measures of European output have been disappointing. In Sweden, the fall in industrial production as the demand for exports declines has raised alarms given the country’s reliance on exports for half of its economic output. As the markets rattled with volatility over the past month and billions were shed of market value, the securities lending activity in Sweden was relatively busier than normal. With the expectation that securities lending activity would typically fall by about 10% between July and August as the securities lending markets quieten down, this year recorded only a 1.8% decline. We look at investor sentiment in stocks which have observed the largest increase in securities lending activity in the past month including; Securitas Ab (STO:SECU B) and Elekta Ab (STO:EKTA B) and the largest decrease in activity including; Ab Electrolux (STO:ELUX B) and Nibe Industrier Ab (STO:NIBE B).

The second largest security services provider, Securitas AB, reported disappointing second-quarter 2011 earnings which prompted shares to fall to unprecedented lows. Securities lending activity jumped by 45% over the past month as short interest doubled to a new annual high of 4% of total shares. Institutional investors have bought back some shares after the total institutional ownership of funds who lend fell to annual lows, post dividend, in July. Currently, 23% of the market capitalization is being held by these investors.

Elekta Ab specialises in cancer treatments and earlier this year announced its most recent acquisition Nucletron to complement its current product offerings. Despite the headwinds faced by such firms as governments cut budgets and public spending, the stock price rallied to new annual highs in July after which it fell by a third. Securities lending in the stock also recorded a surge whilst institutional investors, who lend their shares, have been mildly bullish towards this stock increasing their holding by 20% over the past year.

On the other side of the spectrum, Ab Electrolux, the world’s second largest appliances maker, recorded a 22% reduction in securities lending activity as measured by fewer new loans. The company has recently confirmed that it is acquiring Compania Industrial SA in line with its growth strategy in Latin America. The recent fall in the share price to new annual lows has prompted some short covering reducing stock on loan from 11% to 9% of total shares.

Nibe Industrier Ab is a smaller cap stock of USD 1.5 billion which provides heating technology solutions. This stock was highlighted from our dataset after having recorded a 43% decrease in the number of total open transactions over the past month and we see interesting activity from the short sellers. A historically thinly traded stock amongst short sellers, it saw a surge of short interest in April from insignificant levels to an unprecedented high of 10% of total shares in June. This also represented 60% of the total lendable supply. Short interest has since declined to 3.5% of total shares as the share price continues to trade in its upper quartile.