Short Interest goes up all year then collapses as converts are exercised.

China Hongqiao (1378 HK) manufactures aluminum products and holds a market capitalization of approximately $29 billion USD, cementing its role as a major player in the global aluminum market.

The stock is up 105% year-to-date, with much of the rally occurring in recent weeks—placing it firmly in potential short squeeze territory, according to S3’s short interest analytics.

Short interest remained elevated throughout the year, making the stock a consistently crowded short. Its Crowded Shorts Score stayed above 75 for several months—indicating sustained short squeeze risk and heavy short-selling sentiment data.

However, much of the short interest activity was convertible arbitrage-related, resulting in no meaningful net short exposure—and therefore not reflective of a traditional short squeeze or crowded trade sentiment.

Real squeeze signal: Short interest sat above what the convert hedge implied, then fell faster than new shares were listed—evidence of non-hedge covers and residual squeeze pressure (Hongqiao: −236m SI vs +120m new shares). S3 surfaces this in real time via SI-vs-issuance, borrow-fee, and utilization trends.

Cover, not just convert: The simultaneous easing in borrow fees and utilization alongside the SI drop pointed to directional shorts exiting—not just a hedging unwind. S3’s borrow/locate and utilization signals separate mechanical conversion flow from a sentiment shift.

As the stock price climbed, the delta on the two convertible bonds increased—prompting arbitrage investors to short more shares as a hedge. Short interest more than doubled before returning to earlier levels, following a textbook convertible arbitrage pattern.

The 2026 convertible bond delta reached 100%, and a missed dividend lowered the conversion price—further increasing the probability of bondholders converting into equity.

In August, short interest fell by 236 million shares, while 120 million new shares were issued via convertible bonds—suggesting that approximately half of the short interest decline was directly tied to convertible issuance.

The recent decline in short interest was partially driven by the conversion of convertible bonds into equity, with short positions being covered by the long shares received upon conversion

The remaining decline in short interest may reflect a true short squeeze dynamic, driven by surging stock prices and declining short positions—notably in the absence of hedging behavior.

Want to know more? Access this data in real time using S3’s BLACK APP & BLACK MAP

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.