Top European and Asian shorts of 2015

Following on from Tuesday's look at the best timed North American shorts of the year, we review the positions which paid the most handsomely for short sellers in Europe and Asia.

• Asia more fertile for short sellers last year as short targets feel twice as much as in Europe
• Lonmin was the best European short of the last year as its shares fell by over 99%
• Australia stocks made up ten of the top 20 performing Asian short positions

Markit's review of the US short selling market found that the increased shorting has been rewarded as stocks with over 3% of shares outstanding on loan went on to subsequently fall by 15% over the year. Today's report looks at the best performing short positions in the Asian and European markets, focusing on the performance of shares after short sellers targeted more than 3% of a company's stock.

A high level look at the average returns of shares under scrutiny from short sellers in both Asia and Europe reveals that short sellers have enjoyed a fruitful year, with shorted stocks going on to fall by an average of 9% and 6% in both markets respectively.

European short positions

European short sellers have been relatively bearing in the last 12 months, with the ongoing ECB QE programme encouraging subdued short selling across the eurozone.

This relative low propensity to sell short in eurozone markets is also highlighted by the fact that eurozone shares only made up 9 of the 20 most successful short positions globally.

The UK market, which has seen much more shorting activity over the last year, has also proven more fertile for short sellers as UK stocks make up over a quarter of the 20 most successful short positions of the year.

On top of managing to reap the lion's share of successful short positions, the UK market also featured the most successful individual position; platinum mining firm Lonmin. Lonmin's shares were heavily shorted heading into the year, but short sellers redoubled their attentions with the firm registering a fresh annual high in shorting activity in April, when 9.6% of its shares were out on loan. Its shares went on to lose over 99% of their value as the firm struggled with a mounting debt pile and falling platinum prices.

Fellow UK firm Afren joins Lonmin as the other short target which went on to lose more than 90% of its value after seeing a fresh annual high in short interest. The catalyst for Afren's price collapse was the falling price of energy, a popular theme for short sellers over the year. This trend also led four of the year's 20 best performing European shorts with Seadrill, Premier Oil, DNO and Tullow all joining Afren in the top performing list.

Most shorted in Asia

Energy also played a key role in the best performing short list in the region this year with six of the region's top performing shorts coming from the sector. The best performing position among the lot was Singapore listed Ezra. Its shares registered a new annual high in short interest in February and have since fallen by 82%.

The honours for the top performing Asian short position of the year goes to Korean cement pipe manufacturing firm Wei Mon whose shares fell by 91% prior to their delisting. Short sellers timed their position well given that the surge in short positions came just before the company's share price collapse.

Korean shipbuilders Daewoo Shipbuilding & Marine Engineering and Samsung Engineering also joined the lists of the best performing short positions as slowing global trade and oil development reduce the need for new ships worldwide.

The most fertile ground for short sellers overall was Australia as ten of the top 20 best performing short positions in the region came from the country. This list is led by law firm Slater and Gordon whose shares have fallen by 85% since coming to the attention of short sellers in early April.

Much like in Europe, the ongoing QE programme in Japan made the region a relatively inhospitable place for short sellers, meaning that shorts have been relatively bearish in the region. This is highlighted by the fact that only three Japanese firm feature among the 20 most profitable short positions in the region; a relatively small proportion given that Japanese firms made up over a third of the observation universe.

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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.