Hedge funds continued to sell global equities for a third consecutive month in June, marking the fastest pace of selling since June 2022, according to Goldman Sachs’ prime brokerage desk. The sales were chiefly driven by short sales, as overall long flows remained relatively flat, Goldman said in a note.
“Single Stocks were net sold for a second straight month and saw the largest notional net selling since Nov ‘22, driven by short sales outpacing long buys 4 to 1. 9 of 11 global sectors were net sold in June, led in notional terms by Info Tech, Financials, Real Estate, and Staples,” the note states.
Macro products, including indices and exchange-traded funds (ETFs), were marginally net bought in June, driven by risk unwinds with short covers slightly exceeding long sales. Excluding mark-to-market adjustments, US-listed ETF shorts on the Prime book decreased by 6.8% in June, with significant short covering in Small Cap Equity, Financials, Industrials, Real Estate, and Health Care ETFs.
“ETF shorts now make up 10.2% of the US equity short book (excl. Index products), the lowest level since Dec ‘19 and near five-year lows in the 3rd percentile,” compared to 11.1% at the end of May and 10.8% at the start of 2024, Goldman Sachs (NYSE:GS) highlighted.
In regional activity, hedge funds sold developed market (DM) Asia stocks for the first time in six months and at the fastest pace since September. All DM Asia markets were net sold, led by Singapore, Australia, Hong Kong, and Japan. North America and Europe also saw net selling in notional terms.
Emerging market (EM) Asia was the most net bought region in June, continuing a trend of net buying in six of the last seven months. Korea and Taiwan were the most net bought markets, which outweighed net selling in China and Thailand.
Chinese equities were net sold for the second month in a row, with net selling in American Depositary Receipts (ADRs) and H-shares surpassing net buying in A-shares.
Sector-wise, 8 of 11 sectors were net sold in June, led by Technology, Media, and Telecom (TMT) and Consumers stocks.