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  1. #1
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    Default Short Selling in NZ

    Came across this today

    https://i.stuff.co.nz/business/indus...falling-market

    Anyone doing or done short selling on the NZX on Sharetrader?

    Love to hear your story on it

  2. #2
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    I Use CMC markets to short shares , CFD ( contract for difference )

  3. #3
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    Quote Originally Posted by epower View Post
    Came across this today

    https://i.stuff.co.nz/business/indus...falling-market

    Anyone doing or done short selling on the NZX on Sharetrader?

    Love to hear your story on it
    As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

    The issue is not that one can go short but rather, more to do with the broker you choose. Even more concerning, the particular stock you're betting against and what liquidity would it offer in order to close your position (something I doubt the NZX is really capable of offering). Any broker, in order for them to allow their clients to take short positions requires them to find someone (another broker or major client) willing to LEND those shares. As energetic these trades are in the US equities, there are still limitations due to again, which broker you trade with. The big boys that take short positions usually don't mingle with the small retail market (just like in the IPO sense). Meaning your order to short goes unnoticed and unfilled ; while the key players that do - do so off the record.

    The article also says regulations say you can't stay in short position for long. Such as when dividend dates are declared meaning you have to close your position before then. These regulations by the NZX make any proposition to profit even more riskier. Yet from the basic eye - long term majority of NZX listings go bust. This is to protect overseas brokers from hammering on the NZX and raping it knowing that so many small listed NZX companies go bust ; so naturally there will be more regulations on the NZ end of things.

    With high commissions and slow executions of trades, why do you want to mess playing on the NZX by going short?

  4. #4
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    Quote Originally Posted by SBQ View Post
    As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.

    The issue is not that one can go short but rather, more to do with the broker you choose. Even more concerning, the particular stock you're betting against and what liquidity would it offer in order to close your position (something I doubt the NZX is really capable of offering). Any broker, in order for them to allow their clients to take short positions requires them to find someone (another broker or major client) willing to LEND those shares. As energetic these trades are in the US equities, there are still limitations due to again, which broker you trade with. The big boys that take short positions usually don't mingle with the small retail market (just like in the IPO sense). Meaning your order to short goes unnoticed and unfilled ; while the key players that do - do so off the record.

    The article also says regulations say you can't stay in short position for long. Such as when dividend dates are declared meaning you have to close your position before then. These regulations by the NZX make any proposition to profit even more riskier. Yet from the basic eye - long term majority of NZX listings go bust. This is to protect overseas brokers from hammering on the NZX and raping it knowing that so many small listed NZX companies go bust ; so naturally there will be more regulations on the NZ end of things.

    With high commissions and slow executions of trades, why do you want to mess playing on the NZX by going short?
    SBQ can you substantiate " long term majority of NZX listings go bust."

  5. #5
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    Quote Originally Posted by SBQ View Post
    As in the article, going short on NZ equities is rare. Hell I tried to enter short positions on NAKD which trades on the Nasdaq and TDAmeritrade didn't have any allocated shares to lend.
    Thanks for sharing your thoughts.

    Per here it appears there are shares available for NAKD:
    https://iborrowdesk.com/report/nakd

    but from what you are saying, these shares might not be available to retail investors, depending on your broker. Is that correct?
    Last edited by Ferg; 28-04-2021 at 09:29 PM. Reason: typo

  6. #6
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    Quote Originally Posted by stoploss View Post
    SBQ can you substantiate " long term majority of NZX listings go bust."
    Well just look at the composition of the NZ50 index and compare how many of those companies existed 50 years ago? How many 20 or 30 years ago? Go over in the US equities and compare - if any large cap drops out or nearly goes bust, they become a buy out target (can't say the same for many NZ listings - even successful ones like Xero simply abandon the NZX for ASX. Sure there are some large caps that go bust such as Enron but the bottom line is 'quality'. Then there's the issue of listing requirements where the NZX is far more slack that favour the insiders more than the retail investors. Then add the nonsense that NZ shareholders expect dividend payments (despite keeping the profits within the company would generate higher share prices which are tax free capital gain vs dividend payments triggering a tax liability) is beyond me. No wonder investments like the TWG have no capital gains - perhaps a loss when inflation adjusted.

    @ Ferg:

    That chart is meaningless. As I said before, it's highly broker dependent on what shares you can take a short position. Even a large broker like TDAmeritrade (which is larger than any NZ/Aus broker; would not have large holdings of 'borrowed shares' of such companies says enough. This is the stuff that the NZ FMA is entirely clueless when advising the public about finance and investing. Just look at their negative statement about options and derivatives in a way that 'scares' people when it comes to investing. You know there is a big difference between Robin Hood platforms and well.. your dinky Sharesies / Hatch platform. But the FMA touts these foreign brokers as risky and oohh scary because they allow derivative trades. FYI, the FB FMA has muted me as i've made these statements on their FB page (yes the truth hurts).

    Anotherwords, those that are in the serious business of shorting are in a different class altogether. They have a broker that is 'able' to find someone willing to lend their shares in the company they want to go short on ; and it's not just any broker, it's the relationship they have where the broker gives preferential treatment to them. The small guy is simply out of luck.

    The unique thing about Robin Hood is they have clients that are stupid enough to make risky bets which opens their landscape for wild west investing. Therefore, they're able to find enough shares to borrow for their clients that want to go short. I can't imagine any broker who does not offer options and derivatives, are able to also offer short positions as both practices are somewhat related in creating such trades.

  7. #7
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    SBQ,
    just because we have new listings in the NZX over the past 20 years doesn't mean the companies that were there before have gone bust .
    Also if a company ( MET) as an example is taken over doesn't mean it went bust .
    Your quote was "Majority of NZX listings go bust "- can you just admit that is a gross inaccuracy , and put your shovel away or provide us some examples if you think this statement is correct.
    BTW, still waiting for you to provide the examples of " most major banks in NZ don't deal with Mortgage brokers "
    Here is an article comparing the top 10 - 2008 to 2018 , None of these has gone bust and most have been around 30 years...
    https://milfordasset.com/insights/la...18-lot-changed

    "Well just look at the composition of the NZ50 index and compare how many of those companies existed 50 years ago? How many 20 or 30 years ago? Go over in the US equities and compare - if any large cap drops out or nearly goes bust, they become a buy out target (can't say the same for many NZ listings - even successful ones like Xero simply abandon the NZX for ASX. Sure there are some large caps that go bust such as Enron but the bottom line is 'quality'. Then there's the issue of listing requirements where the NZX is far more slack that favour the insiders more than the retail investors. Then add the nonsense that NZ shareholders expect dividend payments (despite keeping the profits within the company would generate higher share prices which are tax free capital gain vs dividend payments triggering a tax liability) is beyond me. No wonder investments like the TWG have no capital gains - perhaps a loss when inflation adjusted."
    Last edited by stoploss; 29-04-2021 at 07:54 AM. Reason: add link

  8. #8
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    Quote Originally Posted by stoploss View Post
    SBQ,
    just because we have new listings in the NZX over the past 20 years doesn't mean the companies that were there before have gone bust .
    Also if a company ( MET) as an example is taken over doesn't mean it went bust .
    Your quote was "Majority of NZX listings go bust "- can you just admit that is a gross inaccuracy , and put your shovel away or provide us some examples if you think this statement is correct.
    BTW, still waiting for you to provide the examples of " most major banks in NZ don't deal with Mortgage brokers "
    Here is an article comparing the top 10 - 2008 to 2018 , None of these has gone bust and most have been around 30 years...
    https://milfordasset.com/insights/la...18-lot-changed

    "Well just look at the composition of the NZ50 index and compare how many of those companies existed 50 years ago? How many 20 or 30 years ago? Go over in the US equities and compare - if any large cap drops out or nearly goes bust, they become a buy out target (can't say the same for many NZ listings - even successful ones like Xero simply abandon the NZX for ASX. Sure there are some large caps that go bust such as Enron but the bottom line is 'quality'. Then there's the issue of listing requirements where the NZX is far more slack that favour the insiders more than the retail investors. Then add the nonsense that NZ shareholders expect dividend payments (despite keeping the profits within the company would generate higher share prices which are tax free capital gain vs dividend payments triggering a tax liability) is beyond me. No wonder investments like the TWG have no capital gains - perhaps a loss when inflation adjusted."
    Don't take my word for it. Just ask the average Kiwi about share investing and they tell you nightmare stories of Brierley Investments or more recently, how about Hanover Finance? When the general public has no confidence on the NZ sharemarket and instead, the NZ gov't has to rely on pushing Kiwi Savers as a way to prop up the NZX, and the absence of international investors wanting to buy NZ shares, then my statements are not that far off. No response on the above facts highlighted in red italics and the reason why? You do know things like recently, My Food Bag that float on the NZX benefit 1st the insiders ; which is more likely the culture of most listed NZX companies in the past gives very little confidence to the small retail investor. The FMA will never duly report the ins and outs of this and make fair comparisons to say US equities.

    Several years after the 2008 GFC, I compared the NZX50 index cumulative returns to the S&P500 and ^DJI ; by a long shot the NZX lagged far behind. If NZ shareholders insist on some silly dividend payment program, which makes them pay more taxes vs keeping the profits in retained earnings, then it's no wonder the cumulative returns of the share price on the NZX is not going to be hot. Compare that to the returns of owning Auckland houses over the past 20 years? The people are not dumb in NZ ; they know a leveraged investment in NZ houses in the past and present, is still the best game in town.

    What is lacking in the NZ investment & finance is education. Ever since I was a child growing up in Canada, daily afternoon they had TV talk on how to invest or save for retirement. How to minimise your taxes and claim valuable credits on your tax return. The most that i've seen in NZ is a bit of biased talk by the NZ FMA on FB feeds and other Kiwi Saver funds - but none that fully education on the tax implication. Just have a look at the Finance news in America, all CFPs advise clients from a tax minimisation point of view FIRST.

    We're getting a bit off topic here. The key issue is nothing is fair in finance. Even worse, in NZ is more unfair as the brokers in NZ operate much like brokers did in Canada back in the 1980s.

  9. #9
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    SBQ, Stop changing the subject .How about answering my question about your bold statement ......
    Hanover to the best of my knowledge wasn’t listed onthe NZX.
    So be brave and admit , most NZX companies Don’t go bust .
    Most of my Kiwisaver fund us in offshore equities ,so not propping up the NZX.

  10. #10
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    Quote Originally Posted by stoploss View Post
    SBQ, Stop changing the subject .How about answering my question about your bold statement ......
    Hanover to the best of my knowledge wasn’t listed onthe NZX.
    So be brave and admit , most NZX companies Don’t go bust .
    Most of my Kiwisaver fund us in offshore equities ,so not propping up the NZX.
    How is talking about investor sentiment about the NZX changing the subject? It's a clear fact in NZ that residential properties are the preferred investment and for most of them, they view listings on the NZX as either a scam or far too risky. So when I say "a bust" it's the general response by what 'people in NZ' think. Second, if the latter is not true, then why does the NZ gov't have to ram down Kiwi Saver? Apart from ASX listings, you are aware any share investment abroad attracts FIF at FDR at RWT rates on PAPER gains. But none of those Kiwi Saver funds ever advertise after tax returns on the portfolio.

    The public says a horse with black and white stripes is a zebra... then it must be a zebra. You don't need to hear me back that proof when I say heaps of NZX listed companies go bust or to the lessor extent... yield minimal returns.

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