Hazeltree data shows that shortsellers targeted manufacturing in June amid stress on the supply chain.
Hazeltree data shows that global hedge funds bet heavily against manufacturing shares in June, as investors became'more concerned about disruptions to supply chains due to renewed tensions at the Strait of Hormuz.
The escalation in attacks between the U.S., Iran and other countries has cast doubts on an interim agreement to end the war. The hope of normalising shipping through the waterway had lowered commodity costs and boosted shares of manufacturing companies.
On Tuesday, U.S. president Donald Trump reimposed the naval?blockade on all Iranian ports. He also threatened to strike power plants and bridges if Tehran did not resume negotiations.
According to Hazeltree's data, released on Wednesday, hedge funds bet against more manufacturing stocks in June than any other sector.
Hazeltree data showed that the?most popular June hedge fund short bets were in the manufacturing industry. Speculators are betting on a falling stock price. The number of short bets in June was three times higher than the May figure.
According to Hazeltree, this cohort includes companies who rely on imported parts, including Canadian Solar, Japanese automaker Toyota, and?Puma. The data is based upon 600 asset managers monitoring 16,000 global shares.
Requests for comments were not immediately responded to by the companies.
Daniel Coatsworth is the head of markets for AJ Bell. He said: "If Iran's war doesn't end soon, then there is a risk of global disruption. This is bad news because manufacturing companies are sensitive to economic conditions."
The war has pushed up oil prices and reignited fears about tanker movement interruptions. The increased risk of a full closure has increased insurance, freight, and commodity prices, even without a total closure.
Coatsworth added that "other potential risks for manufacturing profit margins are higher transportation costs, if disruptions in shipping routes lead to higher freight rates. These then spread across the shipping industry."
LSEG data show that before the war, which began on February 28, 90 to 110 vessels would pass through the strait each day. However, flows dropped by 90% during the peak of the disruption.
Even those routes that don't go anywhere near the Middle East are experiencing supply chain strain, according to Andrew Simms. He is a senior equity analysts at Berenberg.
"The freight rates on the?route between Shanghai and L.A. have more than doubled over the past few months."
Hazeltree identifies a stock sector based on the primary economic activity performed by the company. Manufacturing is any business that engages in the transformation of substances, materials or components by mechanical, physical or chemical means.
(source: Reuters)
