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Jul 20, 2017

S3 Analytics: July 10th – July 14th Best and Worst Asian, African & South American Short Performers

Every week, S3 tracks short sellers’ equity positions in Asia, Africa and South America revealing the trades that delivered positive results or missed the mark.  After tracking $198 billion worth of short positions, the above is a list of this week’s top five best and worst performing shorts.

Top 5 Best Asian, African & S. American Performing Shorts:
• 6520 JP: Toshiba was this week’s top performing short after falling 11.6%, generating $72.7 million of profits for short investors. The Court of California issued a temporary injunction in Western Digital SanDisk’s legal action to stop Toshiba’s sale of three NAND flash-memory joint ventures and return to court on July 28th for further review. The matter will probably be settled via binding arbitration.
• 036570 KS: Korean online gaming software company NCSoft dipped 5.8% last week after Samsung Securities cut is price target to 500,000 KRW from 570,000 KRW. NCSoft is redirecting its focus from PC to mobile gaming, following gamer’s trend of playing video games on their phones rather than on their PC’s. NCSoft will need to create mobile games based on their PC legacy product line to generate in-game revenues instead of outright sales. China has recently curtailed the issuance of game licenses to South Korean companies, which will slow NCSoft’s growth in titles in potentially their most profitable market.  
• 068270 KS: The Korean pharma biosimilar product company Celtrion dropped 2% last week after hitting its historical high of 115,500 KRW the previous week. This looks to be a temporary pullback after a several weeks of buying pressure, especially with the U.S. FDA preparing to ease the procedural pathway for biosimilar drug approvals.
• 6753 JP: Sharp Corp. saw its share price gradually decline and finish down 2% on the week, generating $18 million in profits for $1 billion of short sellers. Sharp’s stock price is up 44% for the year but is down 17% since the end of the 1st quarter. Sharp’s short interest is $1.01 billion, up $110 million in June and July.
• 207940 KS: Samsung Biologics, Samsung’s biotech business, fell 6.4% last week. The stock has been rallying for most of 2017 and is up over 75% for the year. After hitting its year-to-date high of 297,000 KRW on June 29th the stock traded in slightly weaker price range for a week before falling 24,500 KRW in one week. Shorts covered a quarter of their positions this month, down $94 million to $283 million, so this price weakness looks to be temporary with shorts already beginning to lose their negative conviction. 

Bottom 5 Worst Asian, African & S. American Performing Shorts:
• BABA US: Alibaba, the Chinese e-commerce giant and the worldwide largest equity short at $22.3 billion, rose 9.4% this week, costing short sellers over $1.3 billion in mark to market losses. Alipay, Alibaba’s online payment platform, has entered the bidding for Indian-based Freecharge, owned by Snapdeal, in an effort to further expand its footprint in India. Also, state owned Sinopharm announced the exploration of a pharmaceutical partnership with Alibaba.
• 2318 HK: Ping An Insurance Group, the second largest life insurer in the world and third largest worldwide short behind Alibaba and Tesla at $8.6 billion, saw a 5.8% stock price increase last week. The company has been gearing up for a technological shift while also pursuing international expansion, investing billions into its financial and information technology. Ping An’s chairman wants to transform Ping An into a technology company within the next 10 years. The company believes that it will be able to capitalize on the Chinese consumer base that is less worried about data privacy and more willing to start using more convenient technology.
• 700 HK: Tencent Holdings, a $360 billion Chinese investment firm that provides a variety of technology-based services rose by 5.9% last week. Tencent is bringing its $435 million/month, accorning to the Wall Street Journal, Chinese revenue cash cow “Honor of Kings” mobile game to the U.S. market. The growth of e-sports creates a strong and under-utilized advertising revenue that will grow Tencents bottom line. 
• CTRP US: Ctrip.com, an online travel agency service, gained 8.3% last week as it was recognized as “Most Honored Company” by Institutional Investor in the 2017 All-Asia Executive Team Rankings. The company’s CEO and CFO were also recognized in their respective categories. CTRP is the fourth largest short in the H.K./China region at $1.7 billion and shorts have lost $473 million in 2017 as the stock has rallied over 43% for the year.
• AGL SJ: Anglo-American, a global mining company based in the UK and South Africa, managed to make the list as its price jumped almost 11 ZAR last week, a 6.3% gain that caused short investors to lose nearly $88 million.  The company stock price rose after the South African government temporarily suspended the implementation of a new mining ownership charter, which would have increased minimum black ownership requirements and provided for extensive dividend redistribution.

Want deeper insight into the above analysis? Contact:
Head of Research, S3 Partners
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC ('S3 Partners') to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks and merits, as well as the legal, tax, accounting and investment consequences, of such decision.

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