The APAC region posted an 8% gain in the first quarter of 2026, but short selling increased by $75.6 billion during the rally. Total short interest in the region increased by $74.0 billion to $397.9 billion, which consisted of the $75.6 billion of increased short selling partially offset by a $1.6 billion decline in the mark-to-market value of existing short positions.

In the second quarter, short sellers pulled in their reins and total short selling only totaled $1.0 billion in the quarter as the APAC region rallied 19%. Even though short sellers stood on the sidelines, total short interest in the region still increased by $50.9 billion to $448.7 billion. The increase was made up of the $1.0 billion of short selling and an additional $49.9 billion increase in the mark-to-market value of existing short positions.

APAC short sellers were up $5.1 billion in mark-to-market profits, 1.4%, in the first quarter but are down $49.0 billion, 11.6%, so far in the second quarter, which partially explains the reversal of short selling seen in the earlier part of 2026.

In the first quarter every sector in the APAC region saw increased short selling, with Financials, Information Technology, and Industrials leading the pack.

• In the Financials sector, Q1 saw the largest increases in short selling occur in Mitsubishi UFJ Financial Group Inc (8306 JP), Japan Post Bank Co Inc (7182 JP), Tokio Marine Holdings Inc (8766 JP), and Mizuho Financial Group Inc (8411 JP).

• In the Information Technology sector, the largest Q1 increases in short selling occurred in Kioxia Holdings Corp (285A JP), Xiaomi Corp B (1810 HK), Yangtze Optical Fibre and Cable Co (6869 HK) & Hon Hai Precision Industry Co Ltd (2317 TT).

• In the Industrials sector, the largest Q1 increases in short selling occurred in Contemporary Amperex Technology Co Ltd (3750 HK), Mitsubishi Corp (8058 JP), Komatsu Ltd (6301 JP) & Sumitomo Corp (8053 JP).

The second quarter of 2026 is seeing a significant slowdown in APAC short selling and actual short covering in some sectors.

• In the Information Technology sector, the largest increases in short selling occurred in Xiaomi Corp B (1810 HK), AES Technology Holding Co Ltd (3711 TT), Quanta Computer Inc (2382 TT) & Phison Electronics Corp (8299 TT).

• In the Industrials sector, the largest increases in short selling occurred in Daikin Industries Ltd (6367 JP), HD Hyundai Heavy Industries Co Ltd (329180 KS), Mitsubishi Electric Corp (6503 JP) & Mitsui OSK Lines Ltd (9104 JP).

• In the Consumer Discretionary sector, the largest increases in short selling occurred in Midea Group Co Ltd (300 HK), BYD Co Ltd (1211 HK), Pop Mart Intl Group Ltd (9992 HK) & Bridgestone Corp (5108 JP).

• In the Financials sector, the largest increases in short covering occurred in Insigna Financial Ltd (IFL AU), Mitsubishi UFJ Financial Group Inc (8306 JP), Japan Post Bank Co Ltd (7182 JP) & Sumitomo Mitsui Financial Group Inc (8316 JP).

• In the Communications Services sector, the largest increases in short covering occurred in Softbank Group Inc (9984 JP), KDDI Corp (9433 JP), NTT Inc (9432 JP) & Softbank Corp (9434 JP).

The rally in the APAC region has reversed short seller sentiment. Total APAC short interest in the first quarter increased by 23% with $76 billion of new short selling making up the majority of the increase. Short sellers had a profitable quarter, up 1.4%, which further spurred short selling. But in the second quarter, large mark-to-market losses of 11.6% were a gut punch to short sellers and conviction faltered. Most sectors saw small increases in short sales, but there were several sectors with short covering. The Industrials, Information Technology, Consumer Staples, and Consumer Discretionary sectors had increased short selling in both quarters, but the Financials, Communication Services, and Financial Securities (ETFs) sectors all had short covering in the second quarter. Short-side rotational sector moves can be used to highlight changes in conviction on the short side, which in turn can be used as an additional data point for long-side trading.

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