The total number of short positions in UK companies slid in October as investors piled into bets against consumer firms across Europe amid a squeeze on shoppers’ spending power, new data has revealed.
Short positions, in which investors stand to profit from falls in a firms’ share price, fell sharply in the UK in October to make up 10.78 per cent of the total bets against European firms, well below 20.2 per cent on 30th September and 23.5 per cent at the end of August, according to data from investment analytics firm SEI Novus.
Analysts at SEI Novus said investors had also shifted their sector focus in October and were now piling into bets against firms selling non-essential goods, as investors bank on a slowdown in spending amid soaring inflation and rising interest rates.
Bets against such firms made up some 54.5 per cent of total short activity in Europe last month, up from 17.7 per in September.
Michelle Silsbe, director at SEI Novus, said the data pointed to managers “significantly changing their shorting strategy” as they looked to profit from an economic slowdown.
“October saw consumer discretionary stocks become the most shorted stocks with an increase from 17.72 per cent to 54.51 per cent MoM, reflecting an expectation of declining demand as we head into the winter months,” she said.
“Strong short interest across Europe reflects expectations among managers that equity markets will continue to face headwinds as markets content with rising rates, persistent inflation and the ongoing war in Ukraine.”
US investor Bridgewater Associates led the charge on short positions for the month, according to the SEI Novus, accounting for 33.54 per cent of registered short positions, followed by Marshall Wace LLP accounting with 32.82 per cent and BlackRock Institutional Trust Company making up for 3.72 per cent.