Short the Dip? Bearish Bets on U.K. Stocks Increase Amid Selloff
(Bloomberg) -- While some European investors rush to buy the dip after the recent slide in equities, short sellers are doing the opposite with U.K. stocks.
Bearish bets on stocks in the FTSE 350 Index including Capita Plc and J Sainsbury Plc have risen amid the selloff, according to an IHS Markit Ltd. report dated Thursday. The current short loan balance of 30.8 billion pounds ($43.3 billion) represents the largest position for short sellers in U.K. equities since the first quarter of 2009.
“This is driven by both a larger number of stocks with high demand, as well as increasing demand for the stocks which were already highly shorted,” Sam Pierson, director of securities finance at IHS Markit, wrote in the report.
Short sellers have added to bets against outsourcing firms such as Interserve Plc, Serco Group Plc and Capita following the collapse of construction and services company Carillion Plc. They’ve also maintained positions in popular grocery shorts Sainsbury and Wm Morrison Supermarkets Plc, the report said.
The largest short balances are in the materials, energy and food & staples retailing sectors, which account for 38 percent of the total, according to the report.
The increase in bearish bets is another setback for a market already facing levels of pessimism last seen during the 2008 financial crisis. The FTSE 100 posted the biggest loss among major European equity benchmarks in 2017 with uncertainties lingering over Brexit and turmoil in domestic politics.
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