Ihor Dusaniwsky, general manager of S3 forecasting and analysis department, said: "Short sellers have been actively shorting the declining banking industry."
Of course, the percentage of tradable shares (that is, tradable shares) of Zhiming Bank occupied by short interests is still relatively low, at 3.3%, but it is higher than 2.8% a year ago. According to this standard, TD Bank ranks third among the top 20 financial companies in the United States and Canada.
Zhitong Finance understands that Short interest refers to the number of stocks or other financial assets that are sold short in the market, which is usually used to measure investors’ expectation of the asset’s price decline. Short interest can be used to measure the bearish sentiment towards an asset in the market. If the short interest of a stock is high, it means that many investors expect the price of the stock to fall.
It is worth mentioning that TD Bank appeared on the short list of the largest banks as it sought to complete its $13.4 billion transaction with First Horizon Corp, which will expand its business in the United States. However, due to the recent turmoil in regional banks in the United States, the share price of TD Bank fell in March, and it is widely expected that the bank will renegotiate the transaction.
Therefore, according to Daneshvar Rohinton, portfolio manager of Industrial Alliance, traders are "more interested in shorting TD Bank than usual" because TD Bank has become an arbitration object.
Rohinton said: "Some short sellers are eyeing TD Bank for another reason, because it holds about 10% of the shares in charles SCHW.US, and TD Bank’s position in the Canadian housing market." It is understood that charles schwab was recently examined for its unrealized bond losses, with a market value loss of $47 billion. In addition, recently, variable-rate mortgages are very common in the Canadian housing market, and consumer bankruptcy is on the rise.
Rohinton said: "TD Bank is now in the middle of two big headwinds. Concerns about housing in Canada in particular will be projected to TD Bank. "
Generally speaking, investors are generally cautious about the banking industry after three American regional banks closed down and Credit Suisse was forced to merge with UBS Group AG. However, there is little indication that any Canadian bank has the liquidity problem that investors have recently paid attention to. At the same time, analysts also pointed out that they are worried that TD Bank will be affected by the slowdown of the Canadian housing market and its relationship with the US market by holding shares in charles schwab and planning to acquire regional banks.
It is worth noting that so far, the short position of TD Bank has been a winner. In March, the share price of TD Bank fell by 11%, which was the biggest decline of the Standard & Poor’s/Toronto Stock Exchange Banking Index. At the same time, the market value of TD Bank lost 18.1 billion Canadian dollars (US$ 13.5 billion).
Nevertheless, Dusaniwsky of S3 still warns that the profits of short sellers will evaporate quickly, especially when the share price of short stocks rebounds rapidly.
He said: "Large-scale short selling like what we see in the banking industry is usually a knee-jerk reaction to market turmoil, and once it happens, it will be quickly reversed. "