Hedge funds raise Canadian energy shorts ahead of U.S. election

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The number of short trades as a percentage of total traded volume for Imperial Oil Ltd. rose to approximately 49 per cent for the second half of October, from approximately 36.5 per cent for the first half of October, regulatory filings showed.

There is a sense that there is a greater chance of a Biden win

Rob Romero

Cenovus Energy Inc. saw an increase to 39.3 per cent, from 36.5 per cent, over the same period, while the number rose in Canadian Natural Resources Ltd. to 26.2 per cent, from 25.6 per cent, according to the data.

That compared with 35.6 per cent for Imperial Oil between Sept. 16 and Oct. 1 and 27.1 per cent for Cenovus and 20.4 per cent in Canadian Natural Resources over the same period.

The energy sub-index has fallen 55 per cent since Jan. 1.

Hedge funds typically engage in the practice of short-selling by borrowing a stock from an institutional investor, such as a pension fund, and selling it back at a lower price when shares fall, pocketing the difference.

A Biden win is expected to benefit the cannabis sector as vice president pick Kamala Harris has promised the Democratic party will decriminalize marijuana at the federal level. Some investors expect such a move to benefit U.S. weed companies more than the Canadian producers.

The number of short trades as a percentage of total traded volume rose in Canada’s No. 2 marijuana producer Aurora Cannabis Inc., Canopy Growth Corp. and Aphria Inc. in the run-up to the election.

Biden has also pledged to rescind the presidential permit for Keystone XL, a heavy oil pipeline TC Energy Corp. has sought to build for more than a decade.

However, short trades in TC Energy most recently fell to 21.2 per cent, from 36.6 per cent last month.

© Thomson Reuters 2020

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