SteadyT, the short seller will receive dividend only if they buy back the shares before the ex-date. That is exactly what I meant above - they have to buy back the shares before the ex-date.

SteadyT, yes, if the short seller doesn't return the shares to the original lender before the dividend ex-date, the short seller will have to cover the sum paid as dividend on those shares.

yong99 and tylee81, thank you for your comments.

tylee81, there are currently certain suspicions circulating around that this is a classic "short and distort" campaign. The bad publicity on Top Glove in particular has certainly been way overblown and excessive, much beyond what would have normally been expected. Thus, it is really hard to predict anything right now.

"MrGlover @Ben Tan Are they starting to close their position because they are running out of runway soon?
You mentioned shorting with shares they bought yesterday, does it mean no one is interested to loan them more shares currently?"

I think right now the short seller is in a waiting position. They likely do not have any bullets left on TG and Supermax, so they are currently using the 5,000,000 shares they bought back on Monday (and potentially some shares they might have bought back yesterday) to curb the upward momentum that occurred this morning.

They are most likely waiting for some additional share borrowing deal, but it is possible that they might not have been able to procure such shares yet. This is entirely and only my speculations though. However, there is not really any other logical explanation as to what they are waiting for right now.

"Sunshine123 Ben Tan ... I'm still very blur on how shorting works. Googled for info, but still cannot get a clear idea. In very simple terms, how does it work?"

I give a simple explanation on that here: https://klse.i3investor.com/blogs/bursainvestments/2021-01-09-story-h1539233535-Gloves_The_Bad_Guy_Loses_From_Time_to_Time.jsp

"Stockisnotfun Today got rss volume. Even IB play smarter than you. Still on news."

The IB is trying to dull down the upward momentum. They are likely currently using the bought back shares on TG from Monday to short them again.

Here is how the actual calculation works:
https://imgur.com/G2mFjZh

The only problem is that Bursa's data lags by one day. So when they release the Net Short Position data on Tuesday at midnight, that's actually the correct data as of Monday. So for example today we don't know exactly what has happened yesterday, but we do know that on Monday there has been buying back of shares of Top Glove and Kossan.

SteadyT, see my explanation on how it is calculated in the "Update: January 10, 2021" section here:
https://klse.i3investor.com/blogs/bursainvestments/2021-01-09-story-h1539233535-Gloves_The_Bad_Guy_Loses_From_Time_to_Time.jsp

The short seller has started closing their short position on Monday!

5,000,000 shares of Top Glove have been bought back
3,000,000 shares of Kossan have also been bought back

tylee81, unfortunately there is no way to say. However, it is almost 100% certain that they cannot hold until after the dividend ex-date for the next quarter of any of the companies. The announcements for Supermax and Hartalega are coming very soon, so the short closing will likely happen within this month.

SteadyT, if there is one thing that is special about Kossan, it is that it is the only stock in which the short position is not losing too much. They are trying to keep the price within a range around RM4.20, and they are apparently buying back the shares slowly. For instance, on Friday 1,770,145 shares have been bought back, i.e. about 3.25% of the short position (as of that time) has been closed.

This is the ideal scenario for the short seller - slowly suppressing the price by continuously selling short in order to curb any upward momentum, while at the same time slowly buying back on downtrends.

SteadyT, not any way that I know of. The only thing we know for sure is that on Monday (January 4), it was "foreign" participants on Bursa who initiated the biggest short sale:
https://klse.i3investor.com/files/my/blog/img/bl6707_capture_4.jpg

tylee81 and Cescmy, thank you for your comments.

Let's just sit tight and observe.

For those who have not received their dividend yet, specifically on Rakuten - I just had a call with them. They are currently processing the dividend payouts. Some accounts would have already received it, but others would need to wait a bit more. They estimate that the dividends will be credited into the accounts by the end of this week.

wbwanabe, thank you, I hope it has benefited at least someone!

SteadyT, thank you for your comment.

It is hard to say if the spike in the share price of the glove counters was caused only by the MCO rumors or by something else. Certainly the rumors, which started around that week's Thursday, were a major catalyst though. It is possible that there might have been some fund outflow from bank stock into glove stock because of that reason.

"AlvinTSK TG had paid all dividends to the registered share puchased, If anyone did not receive it is either they bought after the ex date or their account doesnt register the share on time ~~"

That's actually not true. Rakuten haven't banked in the dividend in the Rakuten accounts yet. Recently they have been very slow with that - it takes about 2 weeks.

wpwanabe, EPF is most certainly the biggest beneficiary from the entire exercise, because they are both able to pick up more shares at a lower price, and at the same time they receive a fee from the short seller for lending out their shares. Additionally, they may know better than anyone (other than the short seller) when exactly the short position is going to be closed, thus timing their actions in the best possible manner. It is precisely because the prospects for the glove counters are stellar that EPF has agreed to participate in this exercise.

I am following all of the public announcements, and trade volumes, including short selling volumes.

No shorting on Top Glove, Harta, and Supermax today, but Kossan has been a major fight. This is the only stock on which the short seller is not in a massive paper loss position.

For the morning session 1,024,700 shares have been short sold on Kossan. This is 22.28% of all transactions on the counter for the day so far!

wbwanabe, that is indeed the case. However, I suspect the closing will happen quite a bit earlier than that.

wbwanabe, thank you for your comment.

Unfortunately we do not know what EPF's activity over the last two weeks has been. They may have been buying shares, but they may have also been selling shares. As they stay under the 5% limit, they are not required to announce any trades they make on the stock.

Usually a margin call on shorted stock (i.e. the lender asking the borrower to return the borrowed shares) would occur if the share price rises above a certain level. So it is possible that if the price rises suddenly, EPF could make such a margin call. However, at present this is unlikely due to the bad press the glove industry has been getting over the past few weeks.

PeterPan1979, while EPF doesn't hold the rights over the shares, the short seller who has borrowed the shares would have to reimburse EPF for any dividends that have been paid during the period in which the short seller has been holding the shares. Thus, it is HIGHLY unlikely that the short seller will wait until the dividend ex-date for any of the 4 glove companies. Note that Hartalega and Supermax are supposed to announce their quarterly reports either next week, or in the first half of February.

PeterPan1979, it is an interesting question, because it is related to who holds the rights over the shares. In a nutshell it works like this:

- EPF lends the shares to someone for short selling. The holder of the rights is still EPF at this point.

- The short seller sells the shares, thus opening a short position. At this point the holder of the rights is whoever has bought the shares from the short seller. In other words, EPF ceases to be a holder of the rights over the shares at this point.

Thus, EPF need to declare this as a disposal of shares, but they need to specify that it was done via the SBL facility (if it was done via that facility).

PeterPan1979, thank you for your comment.

The average short price is simply the result of dividing the total value of the transactions by the total amount of shorted shares.

EPF is required to issue announcements of any shares they acquire/dispose of if they are a substantial shareholder. The last announcement they made was on Jan 8th when they ceased to be a substantial shareholder of Top Glove because they had lent 40 million shares to someone via the SBL facility. When such announcements are made, supposedly EPF should specify that the shares were "disposed of" as a result of "SBL". You can refer to the announcement here: https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3119810

No shorting on Top Glove, Hartalega, and Supermax this morning. The only shorting activity is on Kossan - the only counter where the short seller still might have a chance to break even. Is the "big gloves short over"?

https://klse.i3investor.com/blogs/bursainvestments/2021-01-16-story-h1539380474-Is_the_Big_Gloves_Short_Over.jsp

ks5S, Icon8888, 99newbie, kongkakiao, thank you for your comments.

ks5S, unfortunately this is to be expected. The vaccine doesn't give 100% immunity. In fact, it likely gives immunity to a relatively low extent, but it hopefully causes any symptoms displayed by a person getting the virus after being vaccinated to be only very mild.

kongkakiao, yes, this is the only strategy that would allow the short seller to potentially not experience too huge losses. However, even if they manage to execute that, the price will quickly rise back up when they start buying back the shares solely because of the sheer volumes that would need to be bought back.

LaoTzeAhSir and chtan33, thank you for your comments.

chtan33, I think at this point it is truly unlikely that the short seller(s) will break even from the entire exercise. However, they could try one last attack in order to minimize their losses. A large-scale sale on Monday morning, for instance, could swing the price downwards potentially for long enough for the short seller to be able to take advantage of the panic. They would still report losses, but the losses will be lower than they are right now.

Orlando, ming, and lkoky, thank you for your comments.

ming, I am not following your thought. Are you saying that this is a sum-zero game? This will be the first case in the history of an institutional investor wanting to lock in the market price within a certain range by spending an enormous amount of money on short selling against a long position they already have.

Peter5151 "once the short position is open, does the short seller need to close the position within certain timeline ?"

When it comes to regulated short selling, and when it's an arrangement between two institutions (as is the case here), there doesn't seem to be any specified time limit in Bursa's rules and regulations. However, the borrower of shares normally pays for every day they hold the rights over the borrowed shares, so the time-value is against the short seller in such transactions always.

AXE666, cpchuan, nobullshit_investor, sagaraken, Anthem2, LimitUp, treasurehunt, thank you for your comments.

AXE666, the confirmed impact (i.e. without the share price moving, and without them doing anything), they will keep incurring losses as they would have to pay ongoing fees to the shares lender. Thus, time is not unlimited in their position, and delay is very expensive.

cpchuan, unfortunately I don't think this applies in this situation. This is an arrangement between major institutions. We know that at least one of the lenders of shares is EPF because of their official announcement of lending out shares multiple times via the SBL facility. At such volumes and when it involves two institutional counterparties, a margin call is unlikely to come through, unless the price really jumps by a lot.

nobullshit_investor, the similarity in support price and the average shorting price is no coincidence. The short seller(s) did most of their work on Jan 4th when the price dropped the most. The price for TG, for instance, hasn't broken 6.88 predominantly because of the ongoing short selling pressure.

sagaraken, yes, one major factor we don't have visibility on is how many more shares the short seller has borrowed. Regarding fundamentals, as I've mentioned elsewhere the current market valuations make little sense. Time is in favor of the current long holders of the glove stock, and against those positioned short.

Anthem2, I was also surprised to see TG being singled out again for reporting positive cases in its factories. With 4,000 cases daily, many of which coming from labor intensive industries (i.e. manufacturing), and Top Glove having a total workforce of 21,000 it is really hard to see how 0 cases could be reported on an ongoing basis. I actually think it's job well done on TG's part to proactively report on the discovered positive cases.

LimitUp, I can see how such stories are getting spun out of proportion, which hopefully is done without malicious motives. This round of bad press may have some short-term effect, but I believe it will be rather negligible.

treasurehunt, the only thing we can be certain about is that the big short from Jan 4th was done by a foreign institution. The daily reports on segmentation of inflow and outflow of funds thereafter are rather inconclusive. For example, on a number of days local institutions were net sellers on Bursa, whereas foreign institutions were net buyers. The volumes of short selling for the rest of the days were just not meaningful enough to give us a clear picture.

gemfinder, as I can see you are trying very hard, let me give you a piece of advice. If you want to achieve a better return on your time spewing bad news, it's best if you do it via different accounts. Now that everyone knows that you are doing it on purpose, it loses its value and the effect is negated. There are a handful of other accounts in the forum that do the same thing and they are already known. Hence, when you do it (spewing bad news), it has the opposite effect of what you are trying to achieve.

BALANCE_VIEW, kewaljit, pfsurewin, Vairocana9999, EasyM88, Goldberg, thank you for your comments.

kewaljit, yes, it is possible that they are waiting for negative news for gloves, although it seems like at this point most of the very negative news are baked into the price. Without the ongoing shorting for the past 2 weeks, the share prices of the 4 companies were likely going to be 50 to 100 sen higher than they are. In the meantime, any fees payable to the shares lender are still rolling.

Vairocana9999, I agree. I think the best way the companies, especially the ones that are currently in a very robust net cash position, could play it if the short selling continues, would be to embark on a slow SBB exercise.

ming, Vc Looi, lkoky, goldenluck16, PZOGRO, thank you for your comments.

ming, please read my previous article on the topic to which I've linked in this post. RSS is not for hedging purposes only.

PZOGRO, I haven't seen any official announcement for that up to now.

Stockisnotfun "People already get used to increasing covid cases. We are not that panic like last year. People won't panic buy gloves one."

This is actually a major issue. This means that the containment won't be as quick and as effective as it was in March-April, because compliance is key. If the general attitude doesn't change, we are in for a long MCO.

If you are interested on where the short position for the 4 glove counters stands, this is my analysis of the situation:
https://klse.i3investor.com/blogs/bursainvestments/2021-01-16-story-h1539380474-Is_the_Big_Gloves_Short_Over.jsp

Viewed another way - the total market capitalization of the 4 companies, approximately RM120 billion, represents a little less than 7% of the total market capitalization of Bursa Malaysia, but they attracted 91% of the value of the short sales.

Just a quick note - the total shorting for Top Glove, Hartalega, Kossan, and Supermax, just crossed the RM2 billion mark on Friday. The total short sale trades value for the last two weeks on these 4 counters alone stands at RM2,003,029,511 based on Bursa's data.

This is equal to 91.07% of the total value of the short positions on any stock on Bursa Malaysia for these two weeks since regulated short selling was allowed again.

enigmatic, thank you for your comment.

I think GillianTan78 was mostly venting his frustration. My goal with this article was really to look in the exact things that might be off with JP Morgan's report and see if I may be able to find a logical answer to these things.

This might be just coincidental but:

The Commander of Defense Supply Center of the United States says the US plan "to invest a half-billion in the domestic production of nitrile gloves, used for nonsurgical purposes in hospitals, as well as the raw material for those gloves, nitrile butadiene rubber (NBR)."

https://news.bloomberglaw.com/health-law-and-business/u-s-to-continue-needing-2-2-billion-n95s-per-year-post-pandemic

Supermax's US expansion will cost US$550 million.

https://www.theedgemarkets.com/article/supermax-incorporates-new-subsidiary-us

observatory, thank you once again for your comment.

I just want to reiterate again - I didn't question JPM's skills of being able to calculate the contract liabilities in the company's quarterly report as percentage of their expected revenue for the financial year. I just gave the example, because JPM could have likely relatively easily gotten the information on what the company's policy on deposits is and what the order cancelation outlook is, by simply asking. They provided this information to me, so it doesn't appear to be commercially sensitive.

Their general point is clear. However, this means that we cannot trust any future prospects data, ever, because the future is always uncertain. Deposits are the closest thing to a guarantee that a provider of goods or services has that if he produces and allocates certain products/services for future delivery, the buyer will accept the delivery and will pay in full. The practice of taking deposits as guarantee for future delivery and payment dates back at least a millennium and it is essential to any type of business where delivery of production is not immediate. Questioning the validity of that practice for forecasting business decisions is the closest thing to hokum I can think of.

NewbieCK, the volume for Kossan is actually the second highest after the volume from last Monday (the day of the big short).

Regarding Top Glove and Supermax, it is possible that the short seller might not have been able to find counterparties willing to lend out their shares. This seems to be the case in particular with Supermax where the volumes have been low throughout the last couple of weeks.

The effort appears to be predominantly on suppressing the stock price of Kossan, and to a lesser extent - Hartalega. It seems like the short seller has mostly given up for now on the idea of breaking even on Top Glove's stock.

Here are the daily short sale trade volumes for today up to now (4:30pm)

Top Glove - 1,450,000 shares (7% of total daily volume)
Hartalega - 1,400,000 shares (25% of total daily volume)
Kossan - 4,700,000 shares (28% of total daily volume)
Supermax - 730,000 shares (<1% of total daily volume)

stockraider, thank you for your comment, although I can see you have copy-pasted it in a number of other places.

pBlue thank you, I was just about to explain that.

Here is the latest data on the daily RSS trades and the net short position on each of the 4 glove stocks:

https://imgur.com/iS4ndjp

Sales, Vairocana9999, dusti, thank you for your comments. I hope my posts help somehow.

qqq33333333 and observatory, thank you for your comments.

observatory, I just want to point out that I am not arguing with the arithmetic skills of the JPM analysts. The collected deposits indeed come to RM1 billion as of the latest financial report, which is about 5% of the projected revenue for FY21 (according to JPM's projections). However, a lot of adjustments need to be made, and this arithmetic explanation is way too simplistic. Some things that need to be taken into account which we don't have complete information on, are:

- What part of the collected deposits represent deliveries due FY20 versus deliveries that flow into the next financial year;

- What part of the collected deposits are for to spot orders versus standard orders;

- How much deposit the company collects for spot and for standard orders;

- What is the cancelation outlook and have there been any material cancelations recently.

Without this data, the 4.7% quoted in JPM's report is largely meaningless.

On another note - my personal expectation was that the RM880 million in contract liabilities reported in the FY20 annual report of the company was going to be the peak level as they reported lead times of 620 days at that point. However, additional RM200 million in contract liabilities were reported in the 1QFY21. This likely means that the excess RM200 million comprises almost entirely deposits for spot orders.

bullpiano and Keyman188, thank you for your comments.

Keyman188, 3 of the 4 reports you mentioned were mentioned in my article above. These are of course only 4 of more than 20 reports. The PublicInvest report was not mentioned, because it includes an "ESG discount". However, as I have mentioned elsewhere previously, ESG matters predominantly when it affects the financial performance of the company. In this case, there are no ESG concerns as of January 2021. There were such concerns in July 2020, and in November 2020, but the report was issued at a later date.

Hi ruby20, thank you for your comment. These notes are indeed valuable.

wkc5657, Gaussian, AdCool, witan, treasurehunt, super_newbie, MatKoh, thank you very much for your comments.

Please, let's not get carried away. I personally don't think there is a breach in the code of ethics of CFA in this case. However, the report is odd enough for there to be merit for us to comment on it.

My personal interest was to discover specifically which parts of the analysis were off, and it turns out it's the part with the FY22 and FY23 net profit projections. There are no specific explanations on why the profit margins are expected to be so low, and this is what bothers me as a reader of the report. I would be interested in getting an explanation on that in particular.

@MatKoh see here: https://imgur.com/xfrR0HP