Posted on FT Alphaville by Tracy Alloway:
The thing to focus on here is not necessarily the spike in active utilisation in November but the slow decline in lendable quantity. According to Data Explorers, the lendable is an indication of institutional ownership — and it seems to have been dropping steadily for the past few months, with a precipitous cliff dive in October this year.
Here’s a bit more detail from Data Explorers’ managing director Julian Pittam, via CNBC:
“From September onwards, about 75 percent of the long-only holders of Nakheel sold their position in September, trending down to about October, November, which is significant - 75 percent is a massive amount,” Pittam said.
Dubai-based property firms Nakheel and Limitless, which are both part of Dubai World, caused panic among investors last week when a standstill on debt owed by the companies had to be agreed.
The investors that sold back in September were obviously of the opinion that there was a potential the bond wasn’t going to repay at par in December, Pittam said. It is highly unusual to sell a bond that’s so close to maturity, he added.
According to Pittam most of the sellers were European long-only institutional investors. Which just leaves one to wonder who the buyers were.
Pittam’s not sure but he has an idea:
“We don’t actually get a handle on who the buyers are, but we suspect that it would have ended up in the local market, perhaps even retail,” he said.
In which case the Na-kheeled over sukuk might indeed end up being a very localised problem.