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Traders Thread - Friday 21st September (TRAD)
Greystone
- 20 Sep 2007 21:22
Master RSI
- 21 Sep 2007 10:43
- 35 of 56
NRK
Shorts the main reason for the sharp fall lately and RAB buying a stake late yesterday...........
from the FT.com
Rock's short-selling stock runs out
By James Mackintoshand Kate Burgess
Last updated: September 21 2007 03:00
Northern Rock was so heavily sold by hedge funds yesterday that the stock of shares available for short-selling ran out - the first time this has happened for a UK blue chip, according to several prime brokers and fund managers.
Shares in the bank plummeted another 28 per cent to 185.2p as the government said it would not extend its guarantee on deposits to new accounts. The drop followed days of falls as hedge funds piled in to bet the price would drop. Short-selling involves borrowing shares from a long-term holder, such as an insurance company or pension fund, and selling them, paying a fee to "rent" the stock.
"It has been a no-brainer trade for three days and there's no availability any more," said one prime broker.
As supply dried up, fees to borrow stock soared, from a typical 0.3-0.4 per cent annually a few weeks ago to 3 per cent as of yesterday. "The only availability is as people sell to cover [their short positions]," another prime broker said. He said the last time a blue chip was this heavily shorted was Germany's Daimler-Benz, during its takeover of Chrysler.
Large numbers of hedge funds have been shorting Northern Rock, with Lansdowne Partners, one of the longest-running short-sellers, having taken a bearish view on the bank four years ago.
However, yesterday London-listed RAB Capital's Special Situations revealed it had become the first hedge fund to buy a big stake in Northern Rock.
Philip Richards, RAB chief executive and manager of the fund, bought a 6.05 per cent stake in the bank, worth 47m at yesterday's closing price, in two chunks, on Wednesday and yesterday. He is understood to believe the bank may be able to rebuild its franchise as it continues to have a good quality book of loans, as well as benefiting from any Bank of England cut in the base rate.
"In all the Anglo-Saxon economies the levels of debt are such that they are fairly unstable," he said. "The Fed [US Federal Reserve] I think are aware of that and realise that you can get into a downside spiral, which they want to avoid. I think the 0.5 percentage point cut [in the US base rate] was well judged and the Bank of England will have to do something similar."
Mr Richards believes the price has been pushed down by the number of short positions, and they will have to close out their trades eventually by buying back the stock.
Mr Richards' bet - equivalent to about 5 per cent of the assets of his fund - has been matched by private investors, who have snapped up Northern Rock shares.
The Share Centre, a stockbroker, has seen a 591 per cent increase on last week's account openings, which it says is due to private investors buying Northern Rock shares. The bank accounted for more than a third of all its deals yesterday.
Other bank shares were dragged down yesterday as Citigroup analysts said Northern Rock's maximum price in a takeover would be 150p a share. Bradford & Bingley fell 8.6 per cent to 299.75p, while Alliance & Leicester dropped 7.4 per cent to 755.5p.
Shorts the main reason for the sharp fall lately and RAB buying a stake late yesterday...........
from the FT.com
Rock's short-selling stock runs out
By James Mackintoshand Kate Burgess
Last updated: September 21 2007 03:00
Northern Rock was so heavily sold by hedge funds yesterday that the stock of shares available for short-selling ran out - the first time this has happened for a UK blue chip, according to several prime brokers and fund managers.
Shares in the bank plummeted another 28 per cent to 185.2p as the government said it would not extend its guarantee on deposits to new accounts. The drop followed days of falls as hedge funds piled in to bet the price would drop. Short-selling involves borrowing shares from a long-term holder, such as an insurance company or pension fund, and selling them, paying a fee to "rent" the stock.
"It has been a no-brainer trade for three days and there's no availability any more," said one prime broker.
As supply dried up, fees to borrow stock soared, from a typical 0.3-0.4 per cent annually a few weeks ago to 3 per cent as of yesterday. "The only availability is as people sell to cover [their short positions]," another prime broker said. He said the last time a blue chip was this heavily shorted was Germany's Daimler-Benz, during its takeover of Chrysler.
Large numbers of hedge funds have been shorting Northern Rock, with Lansdowne Partners, one of the longest-running short-sellers, having taken a bearish view on the bank four years ago.
However, yesterday London-listed RAB Capital's Special Situations revealed it had become the first hedge fund to buy a big stake in Northern Rock.
Philip Richards, RAB chief executive and manager of the fund, bought a 6.05 per cent stake in the bank, worth 47m at yesterday's closing price, in two chunks, on Wednesday and yesterday. He is understood to believe the bank may be able to rebuild its franchise as it continues to have a good quality book of loans, as well as benefiting from any Bank of England cut in the base rate.
"In all the Anglo-Saxon economies the levels of debt are such that they are fairly unstable," he said. "The Fed [US Federal Reserve] I think are aware of that and realise that you can get into a downside spiral, which they want to avoid. I think the 0.5 percentage point cut [in the US base rate] was well judged and the Bank of England will have to do something similar."
Mr Richards believes the price has been pushed down by the number of short positions, and they will have to close out their trades eventually by buying back the stock.
Mr Richards' bet - equivalent to about 5 per cent of the assets of his fund - has been matched by private investors, who have snapped up Northern Rock shares.
The Share Centre, a stockbroker, has seen a 591 per cent increase on last week's account openings, which it says is due to private investors buying Northern Rock shares. The bank accounted for more than a third of all its deals yesterday.
Other bank shares were dragged down yesterday as Citigroup analysts said Northern Rock's maximum price in a takeover would be 150p a share. Bradford & Bingley fell 8.6 per cent to 299.75p, while Alliance & Leicester dropped 7.4 per cent to 755.5p.
Kyoto
- 21 Sep 2007 10:48
- 36 of 56
Kyoto
- 21 Sep 2007 10:59
- 37 of 56
Kyoto
- 21 Sep 2007 11:04
- 38 of 56
Kyoto
- 21 Sep 2007 11:20
- 39 of 56
Master RSI
- 21 Sep 2007 11:24
- 40 of 56
SEY 10.25 - 10.75p +0.50p
Chart shows the way up to the CUP shape
A very much stronger order book on the bid side
depth -- bid 1.8M offer 860K
Chart shows the way up to the CUP shape
A very much stronger order book on the bid side
depth -- bid 1.8M offer 860K
Kyoto
- 21 Sep 2007 11:37
- 41 of 56
Kyoto
- 21 Sep 2007 12:13
- 42 of 56
Kyoto
- 21 Sep 2007 12:18
- 43 of 56
Kyoto
- 21 Sep 2007 12:38
- 44 of 56
Greystone
- 21 Sep 2007 12:42
- 45 of 56
Kyoto
- 21 Sep 2007 12:54
- 46 of 56
Kyoto
- 21 Sep 2007 12:59
- 47 of 56
Kyoto
- 21 Sep 2007 13:35
- 48 of 56
Kyoto
- 21 Sep 2007 14:45
- 49 of 56
Kyoto
- 21 Sep 2007 14:56
- 50 of 56
Kyoto
- 21 Sep 2007 15:36
- 51 of 56
Master RSI
- 21 Sep 2007 16:06
- 52 of 56
SEY 11.50 - 12.25p +1.875p
My predicting CUP shape since yesterday is slowly forming today
My predicting CUP shape since yesterday is slowly forming today
Kyoto
- 21 Sep 2007 16:57
- 53 of 56
Greystone
- 21 Sep 2007 17:01
- 54 of 56
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