SPH share price assassinated by short sellers

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SPH share price is in crisis. 22 June 2020 marked the end of 22 years of journey in the Straits Times Index (STI) for SPH, which was being replaced by Mapletree Industrial Trust. Given that the revamped STI was created by SPH in 1998, the latest development is indeed a terrible setback for SPH share price. But in my view, this move could be a strategy by the management to ward off short-selling attacks.

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From 2 December 2019, SGX has dramatically reduced the borrowing rates for index stocks from 6% to 0.5%. This means that if SPH continued to remain in the STI, SPH share price will be vulnerable to short-selling attacks. Currently, investors had loaned a massive 19.4 million of SPH shares to the SGX Securities Borrowing and Lending Pool (SBL).

Notwithstanding the above, SPH share price is likely to be bearish in the following months. Former STI comrades like SIAEC, StarHub, Golden Agri and HPH Trust all suffered huge decline in share prices following their exit out of STI. So far, I have not seen any blue chips which increased in share price after being booted out of STI.

The removal of SPH from STI came at the worst possible timing for SPH share price as the media conglomerate is struggling to deal with the fallout from COVID-19. The pandemic has soured business sentiments, causing advertising revenue for its media segment to plummet. Likewise, its property segment (SPH REIT) is also affected by lower footfall due to circuit-breaker measures.

The coming 3rd quarter business update will provide more clarity on the full impact of COVID-19 but based on the current state of affairs, it is difficult to envisage that SPH share price will be bullish in the coming months. In this regard, should long-term investors run for their lives or short-sell to hedge their investment capitals? In this article, I will share my insights on the outlook for SPH share price.

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in SPH before. Whether SPH share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

SPH share price fighting gravity

SPH share price used to trade as high as $4.00 back in 2015. In fact, this counter used to be considered as a defensive stock with resilient share price and generous dividends. In recent years, the declining business performance and ailing SPH share price was attributed to a change in readers’ lifestyle trend and reading habits. People are less likely to buy printed newspaper and prefer digital media for consumption of news.

Evidently, the exit from STI has seen a considerably lower volume of short selling, providing some stability for SPH share price. In the week of 22 June 2020, the short sale volume [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: July 6, 2020 — 10:17 pm

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