The proportion of some of the biggest retailers’ stock held by short sellers has risen on the back of uncertainty about the sector’s prospects ahead of next week’s emergency Budget.
Short sellers - who borrow and sell stock they do not own in the expectation of being able to buy the shares later at a lower price - have increased their positions in store groups including entertainment specialist HMV, fashion group Next and electricals firm Kesa.
A snapshot survey of consumer businesses with more than 5% of stock on loan by market capitalisation by Index Explorer published by broker KBC Peel Hunt showed HMV at the top of the retail list with 23.8% of stock on loan.
HMV has long been the most shorted retail stock, but the rise in short interest in retailers such as Next over the past three months is indicative of the negative stance adopted by some investors on the sector - despite the industry’s generally strong commercial performance.
In three months, Next’s percentage of stock on loan has risen from just over 4% to 7.2%, while Kesa’s has climbed from 5% to 8.5%.
KBC Peel Hunt analyst John Stevenson said: “While the retail sector has been hit hard over the past six weeks, short positions are much more benign than we have seen for some time, perhaps reflecting the recent falls and low price-earnings ratio multiples across the sector alongside generally robust trading outside of home-related segments.”