Chinese Crackdown Could Spur New Short Sale of US Listed Shares, Says S3 | Invest News

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Reuters analysis firm S3 Partners.

Short interest in a group of these stocks has increased from $ 50.6 billion to $ 43.5 billion this year and short interest as a percentage of free float has increased from 5.67% to 3.81. %, reflecting the closing of some positions that were in the red after a market rally. in January and February, Ihor Dusaniwsky, general manager of predictive analytics at S3, said in a report.

However, shorts, the bets that stocks will drop in the future, are now broadly profitable for the year, suggesting that there is now room for hedge funds and other speculators to bet on more losses. after the crackdown launched last week.

“The US-listed securities of Hong Kong and China were, overall, a profitable short sale in 2021, although it was not until June when January’s mark-to-market losses / February have been erased, ”Dusaniwsky said.

“We should expect more short selling and a reduction in short hedges.”

The Invesco Golden Dragon China ETF, which tracks US-listed companies headquartered in China, has lost a third of its value from its February high.

China’s market regulator on Wednesday fined a number of internet companies, including Didi Global Inc, Tencent Holdings Ltd and Alibaba Group Holding Ltd, for failing to report earlier M&A deals for approval.

Didi’s shares fell another 4.3%, adding to a collapse of nearly 20% on Tuesday after Chinese regulators ordered the company’s app to be withdrawn days after it was listed on the New York Stock Exchange. for $ 4.4 billion.

“Global investors will need to balance the appeal of China’s large addressable market with the possibility that officials can reshape the company’s outlook with the stroke of a pen,” analysts at BCA Research said.

(Reporting by Medha Singh in Bangalore; Editing by Patrick Graham and Shounak Dasgupta)

Copyright 2021 Thomson Reuters.



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