Short-sellers are increasing their positions in the equity markets of Hong Kong and China as profits from their positions reached $17.3 billion at this point in 2018, a report by analytics company S3 Partners said.
With Hong Kong's benchmark Hang Seng Index down 18% this year and the CSI 300 Index of the top Chinese stocks in both Shanghai and Shenzhen falling 25.8%, "short-sellers continue to increase their positions as their profits build," the report said.
"Hong Kong/China with $80 billion in short interest is the second most shorted country behind the US ($911 billion) and ahead of Japan ($73 billion) and the UK ($66 billion)," the S3 report explained.
The most shorted sectors in Hong Kong/China are the Consumer Discretionary, Financials and Communication Services.
Sectors with the largest profits also had the largest shorts in them with the Consumer Discretionary/Alibaba Group (NYSE:BABA), Communication Services/Tencent Holdings (OTC:TCEHY) and Financials/Ping An Insurance Group (HKSE:2318) being the largest shorts in the most profitable sectors.
"These three largest shorts in the HK/China region have been consistently shorted," S3 said in its report.
It added: "The more stable and 'boring' sectors such as Energy, Utilities and Health Care underperformed on the short side while the more volatile and “high-flying” sectors such as Information technology and Communication Services outperformed on the short side."
Contact Rene Pastor by [email protected]