Sharp rebounds; Hon Hai remains committed to deal
TOKYO (Reuters) - Shares of Sharp Corp (6753.T) rose by nearly 9 percent early on Wednesday, with short-sellers reducing their bearish stance on the struggling TV maker as Taiwan's Hon Hai Precision Industry (2317.TW) appeared committed to investing in the Japanese firm.
Hon Hai said on Tuesday it was in talks with Sharp about taking a bigger stake in the Japanese firm and paying less per share as part of a renegotiated deal after Sharp's deteriorating earnings outlook battered its share price.
Two traders also attributed Wednesday's rebound to a few long-only investors, who had lent their Sharp shares to short-sellers, recalling the loaned stock so they could offload the shares from their own portfolios.
"We have a lot of recall on Sharp," one Tokyo-based trader said. "It looks like the guys who are holding it want to have it back. That means they're actually going to long sell the stock."
"It's not massive. I don't see the exact number. I only see from our portion," he said.
Another trader said: "It's just a little bit ... not too much."
Sharp shares slumped by nearly a third in two sessions after the company reported a first-quarter loss and revised its forecast to a full-year operating loss of 100 billion yen ($1.27 billion), from a previously estimated 20 billion yen profit, after the market close last Thursday.
If the stock recalls increase, short-sellers would be forced to buy back the stock to cover their positions, giving the share price a boost. Shorting Sharp was becoming difficult as most of the stock available to be borrowed had already gone out on loan.
According to data provider Markit, 75.59 percent of Sharp's stock available to be borrowed was out on loan as of Monday, up from 73.70 percent on Thursday when Sharp reported its results. ($1 = 78.6600 Japanese yen)
(Reporting by Dominic Lau; Editing by Ian Geoghegan)
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