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ETF Short Report: Emerging Markets Back In Favor?
By Dave Nadig | July 30, 2010

Related ETFs: EUFN / IWM / RKH / SMH / KRE / XRT / SPY / UTH / RKH / SMH
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It's been a few weeks since we last looked at short selling in ETFs, so we took a look at the July 15 report (which publishes near the end of the month) to see what the markets have been hating lately.

First, the normal caveat: Short interest reporting is buggy, and flawed. Due to double counting issues, it’s possible to have more reported short shares than actually exist in the market.

But that said, like any yardstick, no matter how broken it is, it can still tell you if one leg is shorter than the other.

First up, let’s look at where the money is:

Big Bets
Ticker Name % Float Short 1 Month % Change $Short
SPY SPDR S&P 500 49.57% 3.027676 35,535,745,545.30
IWM iShares Russell 2000 95.59% -5.163966 14,520,884,113.80
QQQQ PowerShares QQQ 31.82% -1.066656 5,884,776,386.28
XRT SPDR S&P Retail 467.01% -1.40951 3,156,142,555.88
IYR iShares Dow Jones U.S. Real Estate 107.99% -6.942071 2,860,315,477.18
EFA iShares MSCI EAFE 7.23% 12.82903 2,420,524,085.10
XLF Financial Select Sector SPDR 34.39% -9.314586 2,053,906,870.95
EEM iShares MSCI Emerging Markets 5.32% -37.0806 2,035,764,337.92
XLE Energy Select Sector SPDR 27.20% 5.291078 1,694,238,414.08
FXI iShares FTSE/Xinhua China 25 19.00% -19.91192 1,540,383,448.00
It's common when looking at this table to see just what we see here: huge bets against the major indexes. This month was no exception, with the data we compiled here at IndexUniverse.com showing nearly half the shares of the SPDR S&P 500 (NYSEArca: SPY) being reported short, and nearly 100 percent shorting of the iShares Russell 2000 (NYSEArca: IWM).

To me, though, the interesting big-money shift has happened around international equities. The iShares products covering EAFE and Emerging Markets (NYSEArca: EFA and NYSEArca: EEM, respectively) are the most liquid international ETFs on the market, and thus they’re the natural target for folks looking to go short. But in the last month, we see near 40 percent reduction in the dollars betting against emerging markets, and a near 13 percent increase in bets against the developed international markets. At the same time, we saw reductions in the short interest attributed to retail, financial and real estate.

If had to draw a conclusion from that trend, it's that investors are regaining a bit of their appetite for risk.

Really Really Short
Ticker Name % Float Short 1 Month % Change $Short
XRT SPDR S&P Retail 467% -1.40951 3,156,142,555.88
SMH Semiconductor HOLDRS 161% 27.00214 926,951,585.28
KRE SPDR KBW Regional Banking 147% 4.100832 1,079,647,832.80
RTH Retail HOLDRS 139% -8.563104 599,480,773.31
XOP SPDR S&P Oil & Gas Exploration & Production 129% -1.348693 653,538,585.28
IYR iShares Dow Jones U.S. Real Estate 108% -6.942071 2,860,315,477.18
IWM iShares Russell 2000 96% -5.163966 14,520,884,113.80
RKH Regional Bank HOLDRS 77% -19.50478 112,996,416.00
PPH Pharmaceutical HOLDRS 66% -1.920351 335,635,469.62
UTH Utilities HOLDRS 63% 0.6015017 42,527,942.73
EUFN iShares MSCI-Europe Financials 62% 1084.335 7,534,440.11

 

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