Short interest in Hong Kong at nine month high
The Hong Kong equities market has become progressively more short, as revealed by our LongShort Ratio which has fallen to a nine month low of 8.05, meaning there are just over eight times more longs than shorts. The ratio in Hong Kong has fallen a staggering 5.4% over the week and has been driven by a sell-off of holdings by institutional investors coupled with strong demand to borrow equities, which is close to annual highs. A screen of the 300 largest stocks traded on the Hong Kong stock exchange shows the average short interest to be only 1.87%, which is well below the average across the S&P 500 of 2.5%. However, several stocks stand out including: Chaoda Modern Agriculture (Holdings) Ltd (HKG:0682) , Aluminum Corp of China Ltd (HKG:2600), Real Gold Mining Ltd (HKG:0246), GCL-Poly Energy Holdings Ltd (HKG:3800) and Ruinian Intenational Ltd (HKG:2010)
Peaks and Troughs for Commodities
The most shorted stock is Chaoda Modern Agriculture (Holdings) Ltd which produces and exports agriculture produce from China. As its share price has tumbled over the past year to new annual lows, short interest has been gradually rising. A recent surge in demand to borrow has led to short interest reaching unprecedented levels of 18% of total shares outstanding on loan.
Aluminum Corp of China Ltd features as the second most shorted stock in Hong Kong. It has also seen short interest peak as its share price trades at just HKG 1 above its 52 week low. Short selling activity since March has jumped from 8% to a new annual high of 15% of total shares outstanding on loan. Almost all the lendable supply is currently out on loan. It must be noted that this company is due to pay out a dividend this week and the quantity of stock on loan may be somewhat inflated due to dividend arbitrage.
Real Gold Mining Ltd has seen its shares suspended following accounting discrepancies. Ahead of the suspension short interest reached an annual high of 10% of total stock on loan, with almost all the lendable supply out on loan.
Two others of note
GCL-Poly Energy Holdings Ltd operates in the solar industry and provides environmentally friendly power plants. Short sellers, who have generally been inactive in the stock, rushed to borrow the stock as the share price tumbled from annual highs in May. Short interest increased from insignificant levels to 5% of total shares outstanding on loan.
Health and nutritional producer, Ruinian Intenational Ltd has caught the interest of short sellers as the share price has drifted to new annual lows. Short interest has increased from 5% to 7.5% of total shares since March.
Prada on the runway
Prada Spa has already begun order-taking from institutional investor ahead of its Hong Kong IPO. We will be tracking the short interest following the IPO later this month.
And finally, November, 16th is the date for our Hong Kong Securities Financing Forum. Make a note in your diaries and to find out more, please go to www.dataexplorers.com/hongkong.
