KUALA LUMPUR (July 3): Inari Amertron Bhd (KL:INARI) topped the list with the highest net short position with 54.72 million shares shorted as of July 2, according to data from Bursa Malaysia. 

Analysts and fund managers contacted by The Edge attributed Inari’s net short positions to hedging, arbitrage by sophisticated traders and profit-seeking activities. Despite the high number of shorted shares, they noted that this represents only 1.45% of Inari's total issued shares of 3.77 billion, indicating that it may not pose a significant risk to the stock's price.

“Inari’s [share price] has seen significant appreciation over the past two months, so it's not surprising that some traders anticipate a correction,” said TA Investment Management executive director and chief investment officer Choo Swee Kee. 

“Additionally, some investment banks have issued call warrants and might be actively shorting the stock,” he added. 

The net short position is used to gauge market sentiment towards a particular asset.

A high net short position can indicate that many investors are bearish on the future prospects of that asset, while a low net short position might suggest a more bullish outlook. 

Meanwhile, Rakuten Trade head of equity sales Vincent Lau said that Inari, being a large and liquid technology-linked stock, is an attractive target for short sellers, particularly foreign funds.

"If foreign investors want exposure to the Malaysian technology sector, Inari might be their best option due to its size and liquidity," he said. 

Kenanga Investment Bank, in its latest technology note on Wednesday, said it continues to favour Inari as a laggard play in the outsourced semiconductor assembly test sector, noting Inari’s plans to expand its artificial intelligence-related (AI) product offerings. 

“At present, it is producing memory products in small volumes via a single line for a customer, with plans to expand to four lines by June 2024. Given that memory goes hand in hand with graphical processing power, memory products will ride on the growing adoption of AI applications. 

“Similarly, its optical transceivers are also riding on the AI adoption driven by the transition to 800G by customers seeking faster data transfer rates within AI-enabled data centres,” said the research firm. 

Inari's share price has been steadily rising this year, buoyed by news of a new US smartphone featuring AI. Its share price has surged over 28% since the start of the year, hitting a two-year high of RM3.89 on June 13.

As of 3.47pm on Wednesday, the stock was up seven sen, or 1.84%, at RM3.87 — exceeding its 12-month target price of RM3.71 — with about 10.59 million shares traded. Its market capitalisation stood at RM14.61 billion.