sainsbury's meat aisle

Short selling of Sainsbury’s shares has jumped to its highest level for over a year as market concerns seem to be building over the UK’s second-largest grocer.

According to data from financial data provider Markit, the proportion of the retailer’s outstanding shares on loan - a proxy for short selling - rose to 13.5% this week, having been only 9.2% in June.

Shorting of Sainsbury’s has grown to its highest level since September 2016, with the exception of one isolated day of trading last month when it peaked at 13.7%.

The rise in shorting of Sainsbury’s comes despite a 17% share price slump over the past six months and signifies the market expects further share price falls are yet to come.

Earlier this month Sainsbury’s revealed like-for-like sales growth slowed from 2.3% in the first quarter to just 0.6% in the second quarter while mounting inflation has hit margins.

Meanwhile while there are concerns that the supermarket could be most affected by Tesco’s deal for Booker which was approved by UK regulators last week.

As its chief rival expands in the convenience and wholesale sector, Sainsbury’s has pursued Nisa before walking away over competition concerns and explored a bid for Palmer & Havery as it sought to respond.

As worries mount over the trading prospects of Sainsbury’s, City confidence appears to be growing in Morrisons.

The Bradford-based supermarket has consistently been one of the most shorted stocks on the FTSE in recent years, but its level of short selling moved below Sainsbury’s in mid-September and has fallen to a current level of 11.9% from 14.7% in early June.

Tesco short trading has ticked up from under 6% in June to 7.8%, but remains significantly lower than its grocery rivals.