{"id":11328,"date":"2026-07-09T09:04:04","date_gmt":"2026-07-09T09:04:04","guid":{"rendered":"https:\/\/www.fintechpulse8.com\/?p=11328"},"modified":"2026-07-09T09:04:04","modified_gmt":"2026-07-09T09:04:04","slug":"whats-driving-the-surge-in-short-selling-on-the-jse","status":"publish","type":"post","link":"https:\/\/www.fintechpulse8.com\/?p=11328","title":{"rendered":"What\u2019s driving the surge in short selling on the JSE?"},"content":{"rendered":"<p><\/p>\n<div>\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1694515?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p><strong>SIMON BROWN: <\/strong>I\u2019m chatting now with Casey Sprake from AG Capital, where she is the market strategist. Casey, always appreciate the early morning time.<\/p>\n<p>A fascinating report you put out on short positions in our market. For listeners out there, a \u2018short\u2019 is usually a hedge fund trader. They\u2019ve borrowed stock. They sell it into the market with the expectation that it will fall, and they can buy it back at a lower price at a profit and then return it to the lender. In other words, sell high, buy low.<\/p>\n<p>Casey, this is a regular occurrence in markets the world over, and in the South African case you\u2019ve just started it. It\u2019s supplied by the JSE, which is able to say what the size of short positions are on individual stocks.<\/p>\n<p><strong>CASEY SPRAKE: <\/strong>Yes. Good morning, Simon, from a sunny Windhoek in Namibia. But yes, as you mentioned, we released a piece this week. It stemmed off a conversation I actually had with our CIO, who had been, as you mentioned, watching this data via the JSE and sort of noticed this trend.<\/p>\n<p>I think, just at a very high level, retail is of course a working capital business. So we noticed that when margins compress and stock stops moving, you\u2019re not starting to get a scenario where you don\u2019t just lose earnings, [but] the balance sheets of course start to fray. And that\u2019s when shorts start to move in from hedge funds such as ours and other speculative capital.<\/p>\n<p>Read:<br \/>Volatility, uncertainty hit JSE returns in first half of 2026<br \/>\u2018Shorting\u2019 in SA<\/p>\n<p><strong>SIMON BROWN: <\/strong>Some of these numbers \u2013maybe they\u2019re not \u2013 to me look really, really chunky. You\u2019ve Truworths, you\u2019ve Spar, you\u2019ve Dis-Chem \u2013 almost 25%, 20.8%, almost 15% of total free float has been borrowed. That looks like a chunky number to me.<\/p>\n<p><strong>CASEY SPRAKE: <\/strong>Yes. It\u2019s starting to grow quite significantly. We can look more from the stairs\u2019 top level, but I think it\u2019s quite interesting if you start drilling down to specific names \u2013 because I think there are a lot of nuanced ones between the various names. It\u2019s not just a simple short story.<\/p>\n<p>For example, I think you mentioned looking at Spar. I think Spar is the clearest example of where market concerns are actually firmly grounded in observable fundamentals, seeing a counter with a history of elevated debt and complex international expansion that is really sort of destroying value.<\/p>\n<p>Read: Bloody nose for Spar as Europe write-offs top R7.5bn<\/p>\n<blockquote>\n<p>So in simple terms in Spar\u2019s case the market is effectively saying that this balance sheet is too tight for the earnings power of the business, so you see some form of recapitalisation.<\/p>\n<\/blockquote>\n<p>Maybe a rights issue or something similar is a realistic scenario.<\/p>\n<p>So that\u2019s why from that case I would say Spar screens as the most fundamentally justified short in that way.<\/p>\n<p>But then, if you look at a name like Truworths, for example, that\u2019s a slightly different story. It stands in a bit of contrast to Spar. That company is still showing positive profitability, but it carries a very large debtors\u2019 book, which is effectively straddling that line between, I would say, almost a retailer and a financing company.<\/p>\n<p>Read:<br \/>\u2018Out of favour\u2019 Truworths overtakes TFG as missteps wipe out nearly R20bn<br \/>A tale of two markets in Truworths interims<\/p>\n<p>So the market is short Truworths not just because I would say, P&amp;L [profit and loss] has necessarily fallen apart, but more because it\u2019s very nervous around a large debtors\u2019 book. And that\u2019s when this makes the shorting of it more sort of extra-relative, as you would say.<\/p>\n<p>The big case is that this could go wrong, rather than this has already gone wrong, and that distinction is important when we talk about embedded value versus sort of outright distressed finance, et cetera. So there are nuances around the names.<\/p>\n<p>Read:<br \/>More problems loom as Spar crashes back to 2008 levels<br \/>Spar profits set to plunge up to 60%<br \/>Spar not looking for further expansion outside Southern Africa \u2013 Swartz<br \/>Spar profit plummets R5bn on Swiss, English business sales<br \/>Spar\u2019s European flop is now a thing of the past<\/p>\n<p><strong>SIMON BROWN: <\/strong>That\u2019s a great point, and they\u2019ve all got a different story. My sense is there\u2019s always a bit of short. We\u2019ve got Woolies, we\u2019ve got Pep, we\u2019ve got Shoprite all at around two point something percent. There\u2019s always going to be some short position. That\u2019s what markets do.<\/p>\n<p>But then there\u2019s what\u2019s called the \u2018days to cover\u2019. Now I\u2019ve seen it across my trading career. You get what sometimes is called a \u2018short squeeze\u2019.<\/p>\n<p>In other words, I don\u2019t know. if something happens, a really good piece of news comes out from a heavily shorted stock, then [there\u2019s] the scramble to the exit because for short sellers to close they need to buy, and they need that liquidity.<\/p>\n<p>And in some of these cases days to exits are running at 20-plus days. Maybe I\u2019m just a coward. That would scare me.<\/p>\n<p>Read: Shoprite defies market slowdown with R136.8bn sales surge<\/p>\n<p><strong>CASEY SPRAKE: <\/strong>100%. And that\u2019s why it\u2019s a space that you really need to sort of be careful around. You mentioned specifically the concentration and sort of \u2018days to cover\u2019.<\/p>\n<p>So I\u2019d say given the size of the short positions relative to your sort of average daily trading volumes, some of these names would take weeks to buy back if shorts needed to sort of cover.<\/p>\n<p>So if you look \u2013 for example I\u2019m thinking off the top of my head \u2013 in Truworths or so I think the current short interest equates to roughly 36\u00a0days of average traded volume. In Dis-Chem the figure is actually closer to two months. So that\u2019s around 57 trading days, which makes any forced covering extremely highly price sensitive.<\/p>\n<p>Read:<br \/>Why Dis-Chem is spending hundreds of millions to disrupt itself<br \/>Dis-Chem prioritising strategic expansion over dividends<br \/>Dis-Chem slides over 7%<\/p>\n<p>So our CIO actually often uses the words, when it comes to derivatives trading, \u2018the tail wagging the dog\u2019 scenario. With these sorts of tools, looking at index futures, options or swaps or whatever, often we see, referencing these names, you can also create additional short exposure beyond the cash market. That really amplifies moves when positions are rebalanced \u2013 which is what I think you alluded to now.<\/p>\n<p><strong>SIMON BROWN: <\/strong>Absolutely. I\u2019ve done a little bit of trading in my life, but these numbers are giant.<\/p>\n<p>We\u2019ll leave it there. That was a fascinating article. Casey Sprake market strategist, AG Capital joined from Windhoek.<\/p>\n<\/p><\/div>\n<p>#Whats #driving #surge #short #selling #JSE<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this podcast on iono.fm here. SIMON BROWN: I\u2019m chatting now with Casey Sprake from AG Capital, where she is the market strategist. Casey, always appreciate&hellip; <\/p>\n","protected":false},"author":1,"featured_media":11329,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[473,3529,382,3000,610,6991],"class_list":["post-11328","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-driving","tag-jse","tag-selling","tag-short","tag-surge","tag-whats"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/11328","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11328"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/11328\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/11329"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11328"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11328"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11328"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}