On shorting stocks in NZ

Fisrt – a picture on why shorting sticks can be a good thing for your portfolio – here is the return on my US portfolio this calendar YTD (the green line) versus the S&P500 (in blue). When the market turned sour in the last weeks my portfolio has stayed up because of the somewhat balanced mix of long and short positions.

my us portfolio return this year

I’ve been scathing in the past of the inability to short on the NZX, but I read on Thursday, in the AFR of all places [no link because the AFR site is unlinkable], that apparently this restriction was lifted three months ago.

I’ve been searching the NZX site without much joy, but I do note that they have “sell short” as a term in their dictionary.

I also note this blog entry from John Dierckx last year which states:

“There are no limits on which companies you can short sell on the NZX. All you need to do is finding an institution willing to lend them for that purpose. “

However, John goes on to explain that:

“Many stockbrokers offer short selling as part of their range of products along with warrants and margin investing. It is usually an additional service provided by broking firms who will arrange the lending part of this themselves. This is not something offered to private investors usually, unless we are dealing with larger sophisticated investment client parties that understand and accept the risks involved. “

So no joy there either.

I’ve also been looking at Direct Broking and ASB Securities, and neither of them appear to offer short selling to retail investors. I’ll therefore take that it is still a no go area for Kiwis.

Of course you can always buy contracts for difference, but to me they look like the bucketshops of the 1920s, and they were one of the drivers of the 1929 crash. For background on that debacle I highly recommend reading Once in Golconda and Reminiscences of a Stock Operator.

I must say the CFD’s are tempting though – I would have loved to have been able to put my money where my mouth is and been short Burger Fuel and Xero in recent times.

Then again, being able to short as a retail investor would have been a much safer approach.

About Lance Wiggs

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1 Response to On shorting stocks in NZ

  1. greg bourke says:

    Personally, I find the NZX site obscure and perversely non-intuitive compared to yahoo and google finance. Likewise it is rather difficult to access the same info on local NZ companies (without druging through every single corporate site) as you can for most ASX and USA companies, particularly through yahoo and google. It’s as if the NZX and its listees want me to mail for a prospetus.

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