KBW Notes Short Interest Falls In Their Banking ETFs (KBE, KRE), But Surges In The Insurance ETF (KIE)

December 26, 2008 8:46 AM EST

Keefe, Bruyette and Woods issued some data on short interest in their ETFs: SPDR KBW Insurance (NYSE: KIE), SPDR KBW Capital Markets (NYSE: KCE), SPDR KBW Regional Banking (NYSE: KRE), SPDR KBW Bank (NYSE: KBE).

The firm noted that short interest for the first two weeks of December decreased 8% for Large Cap Banks (KBE) and 3% in Regional Banking (KRE) but increased 39% for Insurance (KIE) and 1% for Capital Markets (KCE). They compared this to a drop of 14% for the Financial Select Sector SPDR ETF (AMEX: XLF) and the broader SPDRs (NYSE: SPY).

The firm also noted that the 2x inverse financials sector ETFs, such as UltraShort Financials ProShares (NYSE: SKF) and Rydex Inverse 2x S&P Select Sector Fincl (NYSE: RFN), saw a 69% and 30% decrease in their short interest shares, respectively, whereas the 2x long financials sector ETFs, such as Ultra Financials ProShares (NYSE: UYG) and Rydex 2x S&P Select Sector Financial (NYSE: RFL), saw a 150% rise and 83% decline in their short interest shares, respectively. Similarly, the 1x short financials sector ETF Short Financials ProShares (NYSE: SEF) saw an 1220% rise in their short interest shares.

Commenting on the moves, KBW said, "In our opinion, value buyers continue to look for opportunities to enter at attractive levels within the sub- sectors of financials either for attractive yields in ETF versus the underlying index or a longer-term (2-3 years) bullish outlook on sub-sectors of financials."

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