Short sellers lose $500 mln as European travel, leisure and bank stocks surge

* Beaten-up stocks jumped after vaccine news

* Short sellers had cut positions recently

* Losses come after big paydays from falling prices

LONDON, Nov 10 (Reuters) - Short sellers betting against European travel, leisure and bank stocks lost more than $500 million on Monday, after news of an effective COVID-19 vaccine triggered a massive jump in share prices.

Total short-selling losses across industries are likely to have been much higher, and would have deepened on Tuesday when equities extended their recovery. European travel and leisure stocks are up 12% since the start of the month while banks reached a five-month high on Tuesday.

This week’s dramatic rebound in beaten-up share prices followed Pfizer’s announcement of positive data from its vaccine trial, raising hopes of an economic recovery.

Calculations by data provider ORTEX Analytics showed short sellers of European travel and leisure companies lost $284 million based on positions held on Monday.

Losses for European bank short-sellers totalled $233 million.

Rolls-Royce, Carnival and British Airways owner IAG rank among the biggest winners of this week’s rally, while bank stock risers include Societe Generale , Barclays and Lloyds, all up between 10% and 25%.

But for short sellers the rebound equalled pain after several months of profitable bets -- they lost an estimated $101 million on Deutsche Lufthansa on Monday, $52 million on TUI and $66 million on HSBC, ORTEX data showed.

“Whilst Pfizer described yesterday as a great day for science and for humanity, it was anything but for short sellers who look to have been caught out by the market adjustment.” said ORTEX co-founder Peter Hillerberg.

Hedge funds profit when they borrow a stock and sell it back when the price falls, pocketing the difference, a practice known as short-selling.

Funds with significant short positions in travel and leisure stocks include D.E. Shaw, GLG Partners -- which had a net short position in Rolls-Royce of 0.92% on Nov. 4 -- and Marshall Wace, according to UK regulatory filings. The funds declined to comment or did not respond to requests for comment.


Betting against travel and bank stocks had been a winner for hedge funds since governments shut down swathes of their economies in March.

Short sellers had made an estimated $1.87 billion from bank shorts since March to Nov. 6 and $140 million from wagering against travel and leisure companies, ORTEX calculates.

Investors have banked profits and reduced positions since August. But significant outstanding short exposure remained as some bet on further falls following another round of government lockdowns.

The percentage of IAG shares borrowed from those shares physically available to be borrowed -- a measure of short interest known as utilisation -- dropped to under 8% on Monday from 74% a month ago, data from FIS Astec Analytics showed.

But speculators had built up positions against Rolls-Royce, with utilisation hitting 33% on Monday from 10% two months earlier, according to Astec Analytics.

“Companies whose business models have been most impaired by COVID are yet to fully recover from their lows,” analysts at Barclays said in a note on Tuesday.

“They could therefore be the biggest beneficiaries of a successful vaccine deployment, as their depressed revenue and earnings are yet to recover,” they added.


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