What a sad day it was for Canadian investors occupying low positions in Canadian dollar hoping for an optimistic short term gain.
For starters, short sellers who were not in for Canada’s housing market have always been motivated by multiple factors which include; the nation’s banks by Moody’s Investors Service moved a level down, a fall in share at mortgage lender Home Capital Group Inc. and run on deposits; price profits that superseded income rates.
Despite the fact that the economy has been expanding, with growths of 3.7 per cent annually in the first quarter, to some investors it’s just the calm before the storm.
Astonishingly a renowned short seller Marc Cohodes has spent majority of his time betting against the home capital dating back to November 2014- when the stock was at its prime. Taking a historical dive to two decades ago, the net short positions in the Canadian dollar smashed the scales.
Wilkins mentioned in a statement that due to a decline in the nation’s oil price dating back to 2015, which led to the enablement of a quick response by decision makers helped bring back the nation up rather speedily. As a result, enabling the recovery cut across to other regions. She de-emphasized problems relating to Toronto’s housing market and also emphasized that decision makers need to look at the future growth of the economy and not its present situation. According to her, there’s a noticeable monetary policy stimulus embedded in the system.
Canada’s six biggest lenders short interest positions are down, including Royal Bank of Canada and Toronto-Dominion Bank which are the largest banks, currently at about 1.6 per cent. Statistics derived from Markit data. In comparison with about 5.9 per cent at Royal bank on April 25 and 5.5 per cent for Toronto-Dominion bank.
The home capital has also experienced a fair share of pressure from the short sellers. Earlier on Monday, there was a fall on the shares of short positions to 20 per cent, the lowest percentage since July 2015. The Ontario’s securities regulator raised allegations against the alternative lender’s stock, accusing them for misguiding investors about mortgage fraud which led to the company’s downfall in April.
During a press conference, Governor Stephen Poloz made mention of the likelihood of another deduction in the benchmark lending rate of the bank, after splitting it two times in 2015 to 0.5 per cent.
Well for sure this is an obvious indication that policy is now predisposed to tighten, with an immediate move to be expected pretty sooner than later.