Posted by Goldberg > 2021-01-09 11:45 | Report Abuse

Brilliant article Ben. Many thanks for the well presented article, so insightful, exciting and educational.

These are the bes excitable bits. lol


"With the exception of Kossan, scenario A appears to be in play - the short seller has NOT closed their short positions, and the increase in share price is largely based on natural market movement, which is of course great news."

"However, seeing as the general market momentum has categorically swerved towards very positive sentiment regarding glove stocks, throwing more money to defend the opened short positions might not be the best course of action for the short seller."

Absolutely Ben, POSITIVE sentiment towards GLOVEs threw a large spanner in their works (the shorties) and this will lead to them losing a bundle from their misadventure.

Yipeeee.

Posted by Ben Tan > 2021-01-09 12:03 | Report Abuse

Hi Goldberg, thank you for your comment.

Three things that are not directly related to this article, but are important factors for how we could expect the stock prices to move in the near to mid term are:

1) EPF just started paying out the first stage of i-Sinar approved withdrawals. Up to now the total approved amount is RM19.62 billion, so we can expect that at least some part of it will flow into the stock market, with most of that amount likely chasing "popular theme" stocks. With further travel restrictions and potential corresponding economic consequences, the theme will likely be healthcare (including gloves) in the near term.

2) Top Glove is going to start distributing the dividend for 1QFY21 at 16.5 sen per share equal to about RM1.3 billion. We can expect that a significant part of that money might go into buying more of the company's stock.

3) Thereafter the things look very bright as far as corporate calendar is concerned. On February 17, Supermax will be releasing their quarterly report for the last quarter of calendar year 2020. On March 11, Top Glove will be releasing their quarterly report for 2QFY2021. Both of these are expected to be record breaking stellar reports.

Posted by JBond007 > 2021-01-09 12:04 | Report Abuse

Dramatic occurrence in 5 days, glove counters offers the best platform for trading play. Expect roller coaster ride throughout the year.

Posted by Ben Tan > 2021-01-09 12:18 | Report Abuse

JBond007, thank you for your comment.

Indeed there might be a lot of trading opportunities as glove counters have been among the most active for a year now.

Posted by seanyap1 > 2021-01-09 12:32 | Report Abuse

Spot on analysis, i doubt the short sellers will build on their short positions, esp top glove given that the ceiling is set at 4 pct.

Current net short position is 1.9%, and total RSS vol for the week was 2.3% for top glove, which means 0.4% of short sellers have already covered their position. Further short covering is likely to lending more buying support in coming weeks

Other point to note in EPF filings is that, current positipn of their existing external fund managers are still very light, hence once can conclude that insti funds are already underweight and there wont be any shares overhang in the near term.

My 2 cents

Posted by Goldgent > 2021-01-09 12:37 | Report Abuse

Good article on the RSS. But need to consider the expiring of cover warrants in the next three months as well. Yesterday many just rush in to buy the Top 4 without realizing there are many CW going to expire soon. Next week the CW expiring issue will resurface again.

Posted by Ben Tan > 2021-01-09 12:37 | Report Abuse

seanyap1 and Goldgent, thank you for your comments.

Sean, I just wanted to reiterate on the positions - 2.34% is the current net short position, i.e. short position that has NOT been covered yet. 2.4% is the total RSS volume for the last week. So the difference is just 0.06%, or potentially 0.28%, if the other short seller who had an open SBL short position had covered it earlier.

Could you let me know where you saw the EPF filings report? I would be interested to take a look if it is publicly available.

Goldgent, structured warrants on their own shouldn't be a market mover as they do not have economic effect on the company. I understand the thought that the issuers might be interested in trying to suppress the price, but I believe that is part of the reason for what we have been observing this past week.

Posted by seanyap1 > 2021-01-09 12:40 | Report Abuse

Goldgent think the delta hedging for CWs from all the banks for all the glove stocks is est. to be rm1-2b.. not a very big amount if buying liquidity is still there

Posted by Goldberg > 2021-01-09 12:42 | Report Abuse

Totally agree with you Ben-

This will be a major boost for healthcare stocks particularly Supermax

1) EPF just started paying out the first stage of i-Sinar approved withdrawals. Up to now the total approved amount is RM19.62 billion, so we can expect that at least some part of it will flow into the stock market, with most of that amount likely chasing "popular theme" stocks. With further travel restrictions and potential corresponding economic consequences, the theme will likely be healthcare (including gloves) in the near term

2) Supermax is expected to announce a whopping PAT of RM 1 .1 billion or RM0.40 sen earnings per share for the coming quarter. This will leaves Supermax with a Trailing PE of just 9.3 times.

(2.31+5.42+30.58+40=78.31 sen)

7.30/78.31=9.3

I consider Supermax as deeply undervalued.

Posted by seanyap1 > 2021-01-09 12:47 | Report Abuse

Ben, its in top glove’s bursa announcement yesterday, on change in substantial shareholding and at the bottom it gives a breakdown of each external fund managers holding ls for EPF

Posted by Orlando > 2021-01-09 12:51 | Report Abuse

Shit Supermax rebounded d most

Was worried KYY might b in danger of margin call but think he is small fly in ths big counters

Only bot TOPGLOVE n HARTALEGA at happily low prices

Posted by Orlando > 2021-01-09 12:51 | Report Abuse

Btw very good article

Posted by treasurehunt > 2021-01-09 12:52 | Report Abuse

Ben Tan. Nice sharing. RSS was targeting Topglove for the last 5 days. In average, shorties are suffering paper loss rm 267 million base FIFO and the closing price on Friday.

Topglove - RSS in rm 1097 million @ average price 5.6
Harta - RSS in rm 332 million @ average price 10.66
Kossan - RSS in rm 134 million @ average price 4.06

Posted by Orlando > 2021-01-09 12:53 | Report Abuse

Hope d SS got burned like those who tried to do in Tesla

Posted by Goldberg > 2021-01-09 13:03 | Report Abuse

Interesting article for SHORTIES.

Tesla short sellers lost $40 billion in 2020

By Chris Isidore, CNN Business

Elon Musk's net worth soared like one of his SpaceX rockets, increasing by more than $100 billion. And his loudest critics, aka investors who shorted Tesla (TSLA) stock on the assumption the share price would go down, lost a record $40.1 billion betting against him, according to analysis by S3 Partners.

Those critics, with whom Musk has had a very harsh, very public war of words over the years, stood to make a healthy return if Tesla shares dropped in value, but risked big losses if the stock continued to gain.

And, boy, did it gain, rising 743% during the course of the year and the shorties lost their sanity.

Posted by treasurehunt > 2021-01-09 13:17 | Report Abuse

Shorties have different agenda for shorting cash rich company but they are on backfire now.

Posted by Orlando > 2021-01-09 13:23 | Report Abuse

Emmm... who r ths people ths SS?? If can tell thn can counter better

JPMorgan a cahoot?

Posted by treasurehunt > 2021-01-09 13:38 | Report Abuse

It is certainly foreign funds with the assistance of J..P

Posted by Orlando > Jan 9, 2021 1:23 PM | Report Abuse

Emmm... who r ths people ths SS?? If can tell thn can counter better

JPMorgan a cahoot?

Posted by BuLLRam > 2021-01-09 13:41 | Report Abuse

If the shorties have not covered their short positions, their risks have now increased tremendously.
With the increasing covid19 cases worldwide and locally, risks of further lockdowns, shifting of recovery play back to health care play, shorties are in a precarious position.
we are now seeing sifus now looking positive on glove stocks and recommending their subscribers to buy if there are any corrections coming. If any....

Posted by treasurehunt > 2021-01-09 13:44 | Report Abuse

Gloves sector is on recovery play after being downplaying for 3 months.

Posted by FutureGains > 2021-01-09 14:20 | Report Abuse

U must think outside the box.
what u can see the short position is not a REAL..

Posted by FutureGains > 2021-01-09 14:20 | Report Abuse

they could have buy back and sell 10% higher later

Posted by Morpheus61 > 2021-01-09 14:22 | Report Abuse

Posted by FutureGains > Jan 9, 2021 2:20 PM | Report Abuse

U must think outside the box.
what u can see the short position is not a REAL..
________________________________________________________

Haha. That is data provided by Bursa. You mean to say what Bursa is telling us is not REAL or TRUE ?

Posted by BuLLRam > 2021-01-09 14:31 | Report Abuse

Recovery play...a recovering economy play..sectors like financials, consumer related , travel, etc....???
.

Posted by cutie > 2021-01-09 14:40 | Report Abuse

I bought Harta a few daysago and when I click on the seller info, JP appears. Very obvious it is JP. Is the short seller

Posted by Goldberg > 2021-01-09 14:53 | Report Abuse

Correct @treasurehunt, GLOVES are on an upward trajectory after being being pressed shamelessly /manipulatively by IBs. to cover their asses. ie call warrants. As mentioned by Morhpeus time and time again.
------------------------------------------------------

treasurehunt Gloves sector is on recovery play after being downplaying for 3 months.
09/01/2021 1:44 PM

Posted by Ben Tan > 2021-01-09 15:15 | Report Abuse

Wow! I chose a bad moment to go for lunch apparently.

Thank you everyone for your comments and for this great discussion. I just want to request that we keep it civil. We all want to know the truth and different factors point at different directions.

For instance, while the initial short position was opened by a foreign institution, later on during the week, local institutions were net sellers on Bursa, so it might have been a "joint exercise". We will likely never know.

What we know is the publicly available data, which points (at least for now) towards an unpleasant scenario for the short seller(s). However, let's not forget that they still have a significant amount of space to open a yet larger short position on each of the 4 stocks, which would result in further volatility in order to try and cover their existing short position at lower net loss. The most important thing is to think rationally in times like this, with as little emotion as possible.

Posted by koolset > 2021-01-09 15:18 | Report Abuse

Love what you wrote. Do keep writing more, I would love to read more of what you have in mind.

Posted by Ben Tan > 2021-01-09 15:26 | Report Abuse

koolset, thank you. I enjoy your articles, too!

Posted by pjseow > 2021-01-09 16:05 | Report Abuse

Thanks for the great article . I bought both Topgloves and Supermx on Tuesday and Wedneday seeing the great opportunity to buy at super low prices for stocks which have super growth rate , super.cash flow , super margin , super.ROE and super low forward PE .As for Topglove super high dividend yield of 15 %. It was a big mistake for the institutions to short such good stocks with great fundamentals and higher earnings for the next few qtrs

Posted by sosfinance > 2021-01-09 16:28 | Report Abuse

we can only speculate or deduce, but we will never know the truth behind. Commonly in a RSS, the lender or the borrower, do not do it for a short period of time, i.e., one week or one month, it is for a period of more than 1 month, 3 months, 6 months or more. From another angle, players can also churn RSS. Sell, buyback (closed position), sell again, buyback again (closed position again) on the same day. Lender can call back the share anytime (in RSS). This is a risk borrower cannot avoid.

Posted by bpsiah > 2021-01-09 16:58 | Report Abuse

Good write up Ben Tan. As you mentioned Shorties still have much space to do ss. So it looks like there will be more volatility ahead. BTW anyone knows how many trading days short positions can remain open and must be closed?

Posted by williamtkb > 2021-01-09 17:17 | Report Abuse

Big funds RSS to press down price for them to collect low. They had been collected few days and pushing up higher and higher. I don't think they are on losses next week.

Posted by Orlando > 2021-01-09 17:31 | Report Abuse

Great info

Do u know d costs involved ie how much is borrowing cost etc



Posted by sosfinance > Jan 9, 2021 4:28 PM | Report Abuse 

we can only speculate or deduce, but we will never know the truth behind. Commonly in a RSS, the lender or the borrower, do not do it for a short period of time, i.e., one week or one month, it is for a period of more than 1 month, 3 months, 6 months or more. From another angle, players can also churn RSS. Sell, buyback (closed position), sell again, buyback again (closed position again) on the same day. Lender can call back the share anytime (in RSS). This is a risk borrower cannot avoid.

Posted by Orlando > 2021-01-09 17:40 | Report Abuse

I m thinking while stil hv TopGlove in hand EPF lent to SS to RSS won't tis makes its TopGlove holdings to lose value?

Return from lending is bigger thn drop in value?

Posted by Orlando > 2021-01-09 17:42 | Report Abuse

Lately EPF itself has been selling too not long only

Posted by Ben Tan > 2021-01-09 18:11 | Report Abuse

pjseow, sosfinance, bpsiah, williamtkb, Orlando, thank you for your comments!

sosfinance, precisely. That is why above in the comments I mentioned that we can only analyse the publicly available data and nothing more. This is an over-the-counter deal, so we cannot know:

- Who the short seller is;
- Who the short seller borrowed the shares from (except for the 40 million shares borrowed from EPF);
- How much the short seller pays for borrowing the shares;
- How long the short seller can hold the shares;
- Any other parameters of the arrangement;
- Any future plans of this or any other short seller.

(This is relevant to bpsiah's and to Orlando's questions as well.)

However, fortunately the publicly available information gives us some important pieces of data, such as the daily RSS volumes, and the net short positions still open. This is sufficient for our main purposes, and we can derive from it directly or indirectly information on:

- What percentage of the short positions have been closed up to now;
- How close the currently open short positions are to hitting the limit;
- What paper losses might exist for the short seller, excluding any unknown fees (not part of the article, but mentioned by treasurehunt above in the comments section).

We can also extrapolate one more piece of information. As the Kossan short sale position has been closed to a much larger extent than the ones on the other 3 glove counters, this may signify that the short seller's plan has indeed been to close the position relatively quickly - potentially within these 2 weeks since the beginning of the year. I have no doubt that this is what would have happened with all of the counters should the MCO-related news not have arrived at this time.

Posted by roadtomillionaires > 2021-01-09 21:03 | Report Abuse

Hi Ben, very well written and detailed explanation. Keep it up the good work.

I guess we might be able to see another ATH or in other word well deserved valuation, taking into account all the circumstances above.

Posted by Ben Tan > 2021-01-09 21:50 | Report Abuse

roadtomillionaires, thank you for your comment.

I think it might be a bit too early to predict on that. The rally at the end of this week was mostly provoked by the news for a new round of tighter movement restrictions. However, as with many other overreactions on Bursa - this piece of news actually has no material value as far as the glove companies are concerned in isolation from any other factors. The big glove companies have no significant business in Malaysia, and only a minuscule part of their revenue is derived from the country. The only way this piece of news impacts the glove companies is via ringgit's exchange rate movement, and even then to a very small extend.

However, the more important thing - the length of the COVID crisis, and therefore the length of the extraordinary earnings the glove companies are expected to record over the next few quarters, hasn't been understood by the broader market and hasn't been factored in the recent rally. Additionally, most people haven't realized that there is a fundamental shift in the hygiene perception around the world, which runs through a broad range of industries and is here to stay. My personal expectation is that if anything near a ceiling is to be reached, that would happen at some point around the third quarter of this calendar year.

Posted by super_newbie > 2021-01-09 23:41 | Report Abuse

Another excellent write up by Ben! I wonder if the short participants dare to extend their shorts till 4% on RSS aggregated net short position. If yes, what will happen if cancellation of 178,361,800 treasury shares by Top Glove? Over 4% and short squeezing triggered? Ermm...

Posted by sagaraken > 2021-01-09 23:52 | Report Abuse

Just a question, if short sellers havent close their positions, wouldnt it just mean that they will try and push it down next week?

thanks for the well written article Ben.

Posted by seanyap1 > 2021-01-10 00:01 | Report Abuse

Super_newbie,

Can’t cancel shares, as it will technically move TSLWC’s stake above 33% as well, trgigering a mandatory GO

Posted by seanyap1 > 2021-01-10 00:06 | Report Abuse

Ben,

Note that supermax amongst the four are least shorted as well, think part of the reason why that may be could be the free float are tighter and EPF isn’t a direct shareholder hence shorties aren’t able to source for shares to borrow. In conclusion, the volatility that we saw, could be down to EPF’s holdings held in custodian accounts which. As lend out to shorties.

Do please also research and talk about ‘cum-ex dividend stripping’ by short sellers. Now given that top glove shares goes ex on the 11th, are short sellers returning the shares to EPF cum or ex dividends? All of us as EPF contributors or have monies in EPF should know the processes behind this

Posted by Michael Teng > 2021-01-10 00:56 | Report Abuse

Another excellent articles. Well done, guys

Posted by Sales > 2021-01-10 10:03 | Report Abuse

One of the best write up. Thank you and hope to have more write up in the future. God bless you.

Posted by invest200 > 2021-01-10 12:18 | Report Abuse

Ben, thank you for the effort to share this piece of valuable information and analysis. I am also tracking the PSS and RSS data since early December. From my understanding, the date printed on the net short position from bursa should be for a day earlier closing. For example, the latest net short data from bursa stated for 8/jan/2021 was actually for the closing of 7/jan/2021. However the date for total short selling for the day is correct. If you do the net short position date adjustment, you will find that the short seller/s hardly cover any of their position(for all Big4) from Monday to Thursday. We will need to wait for next Monday bursa’s data to see the short position for last Friday. If it still show no cover of short position, the short sellers are in greater risk. A point to note, there were a few days (21 and 22 December) that the short position didn’t change, but all changes were appeared on the 23 December(the changes were more than the total trade volume for the Big4 on 23 December), this could be due to either bursa ‘lazy’ to update or the shorties didn’t update bursa properly. This will confuse the market.

Posted by jian90 > 2021-01-10 12:43 | Report Abuse

I was just thinking if the intention of the short seller was to press down the price so that they can collect more shares at a lower price where for example they shorted a certain amount of shares but when the price went lower, they bought back 2 or 3 times more of the number of shares they shorted so that not only they already bought back enough shares to return to the lender but also made a handsome profit from the additional shares that they bought at a lower price after they pressed down the price?

Posted by VenFx > 2021-01-10 12:44 | Report Abuse

Mind blogging article
Big like to Ben

Posted by VenFx > 2021-01-10 12:47 | Report Abuse

Sometimes it market just act illogically.
Still remember there was 1 glove put call warrant during time of glove super bullish ?

However, things must get to back to it's where it shud be after the craziness.
That's all I can say.

Posted by VenFx > 2021-01-10 12:49 | Report Abuse

Force must be use it right
Else it can bring damages or disaster in the short term.

If the forces are to navigate on par with the broader market, next question is
Will there be any fat meat left ?