We track over 1,800 domestically and internationally traded Hong Kong – China stocks with a total short interest of $104.4 billion. Overall, short interest in these stocks increased from $95.1 billion to $104.4 billion in July, but this increase was due to a market move of over 5% in the Hang Seng Index and over 14% move in the CSI 300. Diving deeper into the numbers using our Black App we see that there was actually $2.24 billion of net short covering in these securities versus $11.54 billion of market appreciation. Interestingly, there was $2.49 billion of short covering internationally, but $247 million of net short selling domestically.
Total short interest in domestically traded HK-China stocks is $40.0 billion with $247 million of net short selling in July. Alibaba (BABA), Pinduoduo (PDD), GSX Techdu (GSX), JD.Com (JD) and Nio (NIO) continue to be the most shorted HK-China securities in the domestic market. The Top twenty domestic shorts were:
Total short interest in internationally traded HK-China stocks is $64.4 billion with $2.49 billion of net short covering in July. Ping An Insurance (2318 HK), Tencent (700 HK) and Meituan Dianping (3690 HK) continue to be the most shorted HK-China securities in the international market. The Top twenty international shorts were:
There was a conspicuous difference between the short selling activity in domestically versus internationally traded HK – China securities, with net short covering internationally and net short selling domestically. Not only were the net numbers on divergent ends of the scale, +$247 million net short selling domestically versus -$2.49 billion of net short covering internationally, the breadth of short side activity was obvious in each locale.
The median change in short selling showed that the trading sentiment was a relative consensus in each locale with the domestic median of $531 thousand of short selling versus the international median of -$1.85 million of short covering.
Three HK – China stocks had significant amounts of new short selling in July. Pinduoduo (PDD), Nio (NIO) and Netease.com (NTES) all had over $100 million of net short sales in July. All three stocks hit year-to-date highs in July and short sellers look to be building positions in overbought or recently overheated stocks and looking for a pullback.
Domestically traded HK – China stocks with largest increase in net short selling:
On the international side, there were no stocks with significant new short selling in July.
Internationally traded HK – China stocks with largest increase in net short selling:
Looking at net HK – China short covering, we only see one stock with an appreciable amount of short covering in the domestic market. GSX Techdu (GSX) also hit a year-to-date high in July, but the accumulated short side mark-to-market losses has created a short squeeze in the stock. GSX shorts are down -$2.17 billion in year-to-date mark-to-market losses with 42% of those losses, -$919 million, occurring in July.
Domestically traded HK – China stocks with largest increase in net short covering:
Internationally traded HK – China stocks saw broad short covering with Meitan Dianping (3690 HK) and Semiconductor Manufacturing International (981 HK) leading the pack.
Meitan hit a year-to-date high on July 9th and shorts are down -$1.2 billion in year-to-date mark-to-market losses by betting against a web based shopping platform during the pandemic, and now it looks like we are in the middle of a classic short squeeze.
Semiconductor Manufacturing Intl was nearing year-to-date highs and shorts were run over by a recent +41% run-up as most semiconductor manufacturers rallied. 981 HK shorts were down -$453 million in mark-to-market losses in July, bringing year-to-date losses to -$1.12 billion and are now getting squeezed out of their trades.
While Alibaba short sellers in the domestically traded BABA continued shorting the stock in July with another +$19 million of short sales, the internationally traded 9988 HK had $159 million of net short covering in July. Different strokes for different folks, BABA is a proxy for the Chinese market domestically and used as a hedge while it is more of an Alpha play in Hong Kong which may explain the divergence in trading in the dually listed security.
Internationally traded HK – China stocks with largest increase in net short covering:
As we can see, investor sentiment can diverge between the domestically and internationally listed HK – China securities allowing for trading opportunities in dually listed securities and sectors represented more heavily in one locale versus another. But if the HK – China market continues to rally we should see short covering worldwide as more and more shorts start feeling the squeeze.
Looking at short selling trends over time provides insight into overall market sentiment as well as the strength of bearish conviction in individual equities. Our Blacklight SaaS platform and Black APP provides an up to date view of short selling and short covering on an equity, sector, index, or country-wide basis allowing investors\traders to better manage their existing long and short positions.
The information herein (some of which has been obtained from third party sources without verification) is believed by S3 Partners, LLC (“S3 Partners”) to be reliable and accurate. Neither S3 Partners nor any of its affiliates makes any representation as to the accuracy or completeness of the information herein or accepts liability arising from its use. Prior to making any decisions based on the information herein, you should determine, without reliance upon S3 Partners, the economic risks, and merits, as well as the legal, tax, accounting, and investment consequences, of such decisions.