President Xi Jinping was voted an unprecedented third five-year term at China’s recent Communist Party congress, consolidating his power as the head of the country, military, and Communist Party. Expecting a continued hardline policy stance in China’s “Zero Covid” policy, Taiwan, and technology sector regulations the Chinese market dropped significantly. On Monday October 24th the Hang Seng index fell -6.4%, the iShares MSCI China ETF (MCHI) fell -9.7%, the KraneShares CSI China Internet ETF (KWEB) fell -14.2% and the iShares China Large Cap ETF (FXI) fell -10.0%.

Most Hong Kong\China short selling occurs in U.S. listed and Hong Kong listed securities with $58.2 billion of total short exposure. U.S. listed short selling is $15.3 billion while H.K. listed short selling is $42.9 billion.

The Largest U.S. listed HK\China Shorts (as of 10.28.22)

Name

Ticker

SI % Float

S3 SI % Float

Fee

Short Interest

ALIBABA GROUP ADR

BABA US

2.23%

2.18%

0.30%

$3,727,924,591

PINDUODUO INC ADR

PDD US

1.49%

1.47%

0.30%

$883,789,218

JD.COM INC ADR

JD US

1.46%

1.44%

0.30%

$734,948,942

NIO INC ADR

NIO US

4.26%

4.08%

0.30%

$696,451,227

LI AUTO INC ADR

LI US

4.39%

4.20%

0.30%

$588,835,830

BAIDU INC ADR

BIDU US

2.58%

2.51%

0.30%

$577,014,673

YUM CHINA HLDGS INC

YUMC US

2.98%

2.89%

0.30%

$490,045,549

TENCENT HOLDINGS LTD

TCTZF US

0.31%

0.30%

$489,794,569

KE HOLDINGS INC ADR

BEKE US

3.47%

3.36%

0.30%

$422,276,666

ZTO EXPRESS INC ADR

ZTO US

3.17%

3.07%

0.30%

$346,755,592

XPENG INC ADR

XPEV US

6.38%

6.00%

0.30%

$319,327,601

NETEASE.COM ADR

NTES US

0.79%

0.78%

0.30%

$311,444,953

BEIGENE LTD ADR

BGNE US

1.83%

1.80%

0.30%

$302,786,295

BILIBILI INC ADR

BILI US

9.93%

9.03%

1.32%

$296,369,161

FUTU HOLDINGS LTD ADR

FUTU US

10.73%

9.69%

0.57%

$278,330,120

TRIP.COM GROUP LTD ADR

TCOM US

1.68%

1.65%

0.30%

$235,590,012

TENCENT HLDGS LTD ADR

TCEHY US

0.09%

2.82%

$233,108,295

HUAZHU GROUP LTD ADR

HTHT US

2.52%

2.46%

0.30%

$217,807,996

NEW ORIENTAL EDUC TECH ADR

EDU US

4.18%

4.01%

0.30%

$149,389,594

FULL TRUCK ALLIANCE ADR

YMM US

3.19%

3.10%

0.30%

$146,831,271

HK\China Short Interest

2.81%

2.68%

0.76%

$15,329,693,337

The Largest H.K. Listed HK\China Shorts (as of 10.28.22)

Name

Ticker

SI % Float

S3 SI % Float

Fee

Short Interest

PING AN INSURANCE GROUP

2318 HK

7.99%

7.40%

0.50%

$2,075,917,167

TENCENT HLDGS LTD

700 HK

0.81%

0.50%

$1,299,570,593

MEITUAN DIANPING B

3690 HK

1.92%

1.88%

0.50%

$1,268,215,067

XIAOMI CORP B

1810 HK

6.27%

5.90%

0.50%

$1,124,872,433

AIA GROUP LTD

1299 HK

0.91%

0.90%

0.50%

$795,090,232

BYD CO LTD-H

1211 HK

3.31%

3.20%

0.50%

$684,835,414

JD.COM INC

9618 HK

1.44%

1.42%

0.50%

$647,281,566

POSTAL SAVINGS BANK OF CHINA CO

1658 HK

15.00%

13.04%

0.50%

$645,856,171

ANTA SPORTS PRODUCTS LTD

2020 HK

5.44%

5.16%

0.50%

$626,606,876

H.K. EXCHANGES CLEARING LTD

388 HK

1.72%

1.70%

0.50%

$586,655,041

ALIBABA GROUP HOLDING LTD

9988 HK

0.48%

0.47%

0.50%

$572,950,550

LENOVO GROUP LTD

992 HK

11.93%

10.66%

0.50%

$559,637,281

NONGFU SPRING CO LTD H

9633 HK

6.36%

5.98%

0.50%

$558,149,292

CHINA MERCHANTS BANK

3968 HK

3.72%

3.59%

0.50%

$510,092,604

TECHTRONIC INDUSTRIES CO LTD

669 HK

3.81%

3.67%

0.50%

$506,100,645

CHINA CONSTR BANK

939 HK

0.93%

0.92%

0.50%

$493,691,684

GALAXY ENTERTAINMENT GRP

27 HK

4.77%

4.55%

0.50%

$476,423,569

CHINA COSCO HOLDINGS-H

1919 HK

12.88%

11.41%

0.50%

$463,381,320

JD HEALTH INTERNATIONAL INC

6618 HK

8.25%

7.62%

0.50%

$454,308,089

YANZHOU COAL MINING CO

1171 HK

9.54%

8.71%

0.50%

$441,649,282

HK\China Short Interest

6.04%

5.44%

1.11%

$42,858,547,108

We cover 841 U.S. listed securities with active shares shorted with $15.3 billion of short interest. Average Short Interest % of Float is 2.81% and S3 SI % Float (which includes synthetic longs created by every short sale in the Float number) is 2.68%, while the average stock borrow fee is 0.76%. On the Hong Kong side, we cover 702 H.K. listed securities with active shares shorted with $42.9 billion of short interest. Average Short Interest % of Float is 6.04% and S3 SI % Float is 5.44%, while the average stock borrow fee is 1.11%. As a comparison, U.S. equities have an average SI % Float of 4.69%, S3 SI % Float of 4.24% and average stock borrow fee of 0.64%.

There are not many H.K.\China Crowded shorts, with most stocks having large floats and active trading. There are three stocks that we consider crowded (Crowded score over 80.00) eleven that are trending towards the Crowded level (Crowded scores in the 70’s).

Most Crowded HK/China Shorts (as of 10.28.22)

Name

Ticker

Short Interest

S3 Crowded Score

CATHAY PACIFIC AIRWAYS

293 HK

$ 375,737,807

95.00

PING AN HEALTHCARE TECH CO

1833 HK

$ 250,305,025

87.50

TIANNENG PWR INTL

819 HK

$ 122,953,117

82.50

FLAT GLASS GROUP CO LTD

6865 HK

$ 195,433,131

77.50

CANSINO BIOLOGICS INC

6185 HK

$ 126,831,490

77.50

EHANG HOLDINGS LTD ADR

EH US

$ 28,459,738

77.50

ORIENT OVERSEAS INTL LTD

316 HK

$ 311,328,628

75.00

IDREAMSKY TECHNOLOGY HOLDING

1119 HK

$ 56,619,016

75.00

MING YUAN CLOUD GRP HLDGS

909 HK

$ 76,567,166

72.50

YEAHKA LTD

9923 HK

$ 65,548,232

72.50

HOPE EDUCATION GROUP CO LTD

1765 HK

$ 45,090,968

72.50

POSTAL SAVINGS BANK OF CHINA CO

1658 HK

$ 645,856,171

70.00

CHINA MINSHENG BANKING CORP-H

1988 HK

$ 324,556,639

70.00

ALIVING SMART CITY SERVICES CO LTD

3319 HK

$ 82,143,277

70.00

Over the last thirty days we saw U.S. listed short interest decline by $4.92 billion which consisted of a $4.66 billion decline in the market value of the shares shorted and $252 million of short covering. Short sellers were decreasing their short exposure even though their trades were profitable over the past thirty days.

U.S. Listed Stocks with Largest Increase in Short Selling: Past 30 Days

Name

Ticker

SI % Float

S3 SI % Float

Short Interest

30D Change Shares Shorted

ALIBABA GROUP ADR

BABA US

2.23%

2.18%

$3,727,924,591

$108,955,839

XPENG INC ADR

XPEV US

6.38%

6.00%

$319,327,601

$86,284,360

LI AUTO INC ADR

LI US

4.39%

4.20%

$588,835,830

$66,675,617

JD.COM INC ADR

JD US

1.46%

1.44%

$734,948,942

$55,261,287

NIO INC ADR

NIO US

4.26%

4.08%

$696,451,227

$53,495,863

TENCENT HOLDINGS LTD

TCTZF US

0.31%

$489,794,569

$34,688,620

PINDUODUO INC ADR

PDD US

1.49%

1.47%

$883,789,218

$27,313,419

U.S. Listed Stocks with Largest Increase in Short Covering: Past 30 Days

Name

Ticker

SI % Float

S3 SI % Float

Short Interest

30D Change Shares Shorted

XTRACKERS HARVEST CSI 300 CHINA A ETF

ASHR US

0.17%

$2,561,953

($220,264,312)

KE HOLDINGS INC ADR

BEKE US

3.47%

3.36%

$422,276,666

($74,342,599)

TRIP.COM GROUP LTD ADR

TCOM US

1.68%

1.65%

$235,590,012

($72,310,816)

BEIGENE LTD ADR

BGNE US

1.83%

1.80%

$302,786,295

($39,154,106)

NEW ORIENTAL EDUC TECH ADR

EDU US

4.18%

4.01%

$149,389,594

($39,020,901)

DRXN DAILY FTSE CHINA BEAR 3X ETF

YANG US

2.81%

2.74%

$5,809,741

($38,460,790)

KANZHUN LTD ADR

BZ US

3.60%

3.47%

$143,219,486

($28,546,864)

LUCKIN COFFEE INC ADR

LKNCY US

1.34%

1.32%

$44,995,777

($25,459,657)

While we saw short covering in U.S. listed securities, there was $744 million of new short selling in H.K. listed securities. Overall, H.K. listed short interest declined by $6.62 billion, with a $7.36 billion decrease in the value of shares shorted partially offset by $744 million of new short selling. Short sellers were actively backing up their short bets as stock prices fell.

HK Listed Stocks with Largest Increase in Short Selling: Past 30 Days

Name

Ticker

SI % Float

S3 SI % Float

Short Interest

30D Change Shares Shorted

AIA GROUP LTD

1299 HK

0.91%

0.90%

$795,090,232

$201,399,700

XPENG INC

9868 HK

5.60%

5.30%

$224,677,527

$112,139,003

PING AN INSURANCE GROUP

2318 HK

7.99%

7.40%

$2,075,917,167

$109,527,717

NONGFU SPRING CO LTD H

9633 HK

6.36%

5.98%

$558,149,292

$102,650,267

LI AUTO INC

2015 HK

2.77%

2.70%

$233,838,829

$99,105,693

SUN HUNG KAI PROPERTIES

16 HK

1.47%

1.45%

$270,134,910

$90,252,135

TENCENT HLDGS LTD

700 HK

0.81%

$1,299,570,593

$75,968,652

GREAT WALL MOTOR CO H

2333 HK

10.37%

9.40%

$308,676,544

$74,405,408

XIAOMI CORP B

1810 HK

6.27%

5.90%

$1,124,872,433

$71,727,094

COUNTRY GARDEN HOLDINGS CO

2007 HK

16.43%

14.11%

$217,323,719

$53,452,553

HAIER SMART HOME CO

6690 HK

4.09%

3.93%

$253,571,312

$52,738,247

CHINA RESOURCES POWER HLDGS

836 HK

4.85%

4.63%

$146,929,908

$51,426,739

HK Listed Stocks with Largest Increase in Short Covering: Past 30 Days

Name

Ticker

SI % Float

S3 SI % Float

Short Interest

30D Change Shares Shorted

MEITUAN DIANPING B

3690 HK

1.92%

1.88%

$1,268,215,067

($93,996,494)

GANFENG LITHIUM CO LTD H

1772 HK

6.87%

6.43%

$189,277,595

($87,646,598)

YUM CHINA HOLDINGS

9987 HK

0.24%

$38,511,555

($87,610,312)

CHINA MERCHANTS BANK

3968 HK

3.72%

3.59%

$510,092,604

($84,139,259)

TRACKER FUND OF HONG KONG ETF

2800 HK

0.49%

0.48%

$63,694,911

($74,760,716)

CHINA MENGNIU DAIRY CO

2319 HK

1.36%

1.34%

$141,647,451

($63,200,266)

ZHONGSHENG GROUP HLDGS

881 HK

13.74%

12.08%

$389,462,424

($59,523,840)

BYD CO LTD-H

1211 HK

3.31%

3.20%

$684,835,414

($57,794,353)

CLP HOLDINGS LTD

2 HK

0.93%

$117,089,101

($54,779,371)

TECHTRONIC INDUSTRIES CO LTD

669 HK

3.81%

3.67%

$506,100,645

($53,661,169)

Shorting HK\China stocks has been a profitable proposition whether they were shorted on the U.S. or H.K. exchanges with shorts up $42.69 billion in year-to-date mark-to-market profits, a +52.2% return on ana average short interest of $81.83 billion. 79% of the 1,888 shorted stocks produced positive returns and 94% of every dollar shorted produced mark-to-market profits, shorting HK\China stocks was a target rich environment to produce Alpha in 2022. Profitable trades are up +56.5% for the month while unprofitable trades down only -21.7%.

Most Profitable US-Listed Shorts

Name

Ticker

Avg Fee

Avg Short Interest

YTD MTM P\L

P\L %

ALIBABA GROUP ADR

BABA US

0.30%

$4,614,240,264

$2,696,989,058

58.45%

NIO INC ADR

NIO US

0.30%

$1,314,437,449

$1,237,895,481

94.18%

BILIBILI INC ADR

BILI US

1.12%

$705,318,837

$989,076,741

140.23%

XPENG INC ADR

XPEV US

0.30%

$477,880,497

$785,109,087

164.29%

JD.COM INC ADR

JD US

0.41%

$1,496,779,146

$759,392,246

50.74%

LI AUTO INC ADR

LI US

0.30%

$779,317,748

$521,532,308

66.92%

BAIDU INC ADR

BIDU US

0.30%

$915,809,516

$473,305,355

51.68%

GDS HOLDINGS LTD ADR

GDS US

1.15%

$367,964,737

$370,922,929

100.80%

KE HOLDINGS INC ADR

BEKE US

0.30%

$487,504,689

$338,815,976

69.50%

KANZHUN LTD ADR

BZ US

0.31%

$302,969,679

$312,167,146

103.04%

Name

Ticker

Avg Fee

Avg Short Interest

YTD MTM P\L

P\L %

TENCENT HLDGS LTD

700 HK

0.50%

$2,101,765,556

$1,633,029,111

77.70%

PING AN INSURANCE GROUP

2318 HK

0.50%

$3,000,734,565

$1,415,328,252

47.17%

CHINA MERCHANTS BANK

3968 HK

0.50%

$1,444,095,833

$966,359,995

66.92%

MEITUAN DIANPING B

3690 HK

0.50%

$1,624,718,550

$868,689,699

53.47%

XIAOMI CORP B

1810 HK

0.50%

$1,024,074,683

$795,567,327

77.69%

ZHONGSHENG GROUP HLDGS

881 HK

0.50%

$1,202,567,494

$618,566,282

51.44%

COUNTRY GARDEN HOLDINGS CO

2007 HK

1.00%

$414,298,739

$604,195,328

145.84%

SUNNY OPTICAL TECH

2382 HK

0.50%

$423,071,469

$589,080,619

139.24%

JD.COM INC

9618 HK

0.50%

$950,448,537

$506,472,536

53.29%

ALIBABA GROUP HOLDING LTD

9988 HK

0.50%

$1,004,005,046

$490,921,799

48.90%

Least Profitable US-Listed Shorts

Name

Ticker

Avg Fee

Avg Short Interest

YTD MTM P\L

P\L %

51JOB INCADR

JOBS US

9.14%

$283,717,895

($62,721,089)

-22.11%

AMTD DIGITAL INC ADR

HKD US

347.73%

$14,730,087

($60,629,035)

-411.60%

LUCKIN COFFEE INC ADR

LKNCY US

3.35%

$56,044,081

($28,285,209)

-50.47%

Name

Ticker

Avg Fee

Avg Short Interest

YTD MTM P\L

P\L %

YANZHOU COAL MINING CO

1171 HK

0.82%

$439,942,769

($190,863,335)

-43.38%

KOOLEARN TECHNOLOGY HOLDING LTD

1797 HK

14.93%

$54,344,665

($122,698,259)

-225.78%

HAICHANG OCEAN PARK HOLDINGS LTD

2255 HK

7.33%

$79,827,460

($37,952,448)

-47.54%

CHINA SHIPPING DEV

1138 HK

0.51%

$44,318,870

($37,573,304)

-84.78%

CHINA SHENHUA ENERGY CO-H

1088 HK

0.50%

$124,788,389

($30,518,420)

-24.46%

On October 24th & 25th, HK\China shorts were extremely profitable with $4.44 billion of month-to-date mark-to-market profits, a +7.5% return on an average short interest of $59.3 billion. The vast majority of stocks shorted were profitable, with 74% of the 1,645 shorted securities making money for short sellers and 92% of every dollar shorted producing positive returns. Profitable trades are up +8.4% for the month while unprofitable trades down only -2.7%.

Most profitable shorts: 10.24.22 & 10.25.22

Name

Ticker

Avg Fee

Avg Short Interest

10/24-25 MTM P\L

P\L %

ALIBABA GROUP ADR

BABA US

0.30%

$3,875,667,320

$520,715,162

13.44%

PINDUODUO INC ADR

PDD US

0.30%

$927,968,507

$209,945,863

22.62%

JD.COM INC ADR

JD US

0.30%

$751,405,247

$84,296,793

11.22%

ZTO EXPRESS INC ADR

ZTO US

0.30%

$364,452,407

$73,747,410

20.24%

BAIDU INC ADR

BIDU US

0.30%

$601,703,102

$71,772,185

11.93%

LI AUTO INC ADR

LI US

0.30%

$595,764,192

$68,911,531

11.57%

TENCENT HOLDINGS LTD

TCTZF US

0.30%

$510,188,618

$66,717,772

13.08%

KE HOLDINGS INC ADR

BEKE US

0.30%

$426,528,900

$51,136,012

11.99%

YUM CHINA HLDGS INC

YUMC US

0.30%

$494,432,842

$50,005,553

10.11%

NIO INC ADR

NIO US

0.30%

$680,793,192

$37,182,772

5.46%

Name

Ticker

Avg Fee

Avg Short Interest

10/24-25 MTM P\L

P\L %

PING AN INSURANCE GROUP

2318 HK

0.50%

$2,151,427,987

$234,868,337

10.92%

MEITUAN DIANPING B

3690 HK

0.50%

$1,326,783,643

$185,864,001

14.01%

TENCENT HLDGS LTD

700 HK

0.50%

$1,358,781,713

$166,084,657

12.22%

AIA GROUP LTD

1299 HK

0.50%

$842,513,670

$107,523,777

12.76%

H.K. EXCHANGES CLEARING LTD

388 HK

0.50%

$609,903,800

$71,869,112

11.78%

JD.COM INC

9618 HK

0.50%

$659,929,349

$62,410,200

9.46%

ALIBABA GROUP HOLDING LTD

9988 HK

0.50%

$587,665,605

$54,024,532

9.19%

XIAOMI CORP B

1810 HK

0.50%

$1,120,451,312

$52,691,011

4.70%

BYD CO LTD-H

1211 HK

0.50%

$704,778,205

$46,617,468

6.61%

JD HEALTH INTERNATIONAL INC

6618 HK

0.50%

$456,591,053

$45,857,128

10.04%

Least profitable shorts: 10.24.22 & 10.25.22

Name

Ticker

Avg Fee

Avg Short Interest

10/24-25 MTM P\L

P\L %

IQIYI INC ADR

IQ US

0.57%

$113,064,622

($9,213,093)

-8.15%

RLX TECHNOLOGY INC ADR

RLX US

0.57%

$31,951,406

($3,897,297)

-12.20%

Name

Ticker

Avg Fee

Avg Short Interest

10/24-25 MTM P\L

P\L %

TECHTRONIC INDUSTRIES CO LTD

669 HK

0.50%

$501,453,977

($14,233,928)

-2.84%

GREAT WALL MOTOR CO H

2333 HK

0.50%

$303,064,536

($13,601,143)

-4.49%

CANSINO BIOLOGICS INC

6185 HK

15.08%

$116,453,130

($13,401,402)

-11.51%

KINGDEE INTL SOFTWARE

268 HK

0.50%

$237,578,903

($10,597,100)

-4.46%

LENOVO GROUP LTD

992 HK

0.50%

$549,439,837

($9,480,048)

-1.73%

ORIENT OVERSEAS INTL LTD

316 HK

1.25%

$299,388,637

($7,481,325)

-2.50%

After a brief uptick after October 24th plunge in HK\China stock prices we are seeing renewed selling pressure in these stocks. Short sellers in both U.S. and H.K. listed stocks have earned outsized short-term mark-to-market profits and if the downward price trend continues, we should see continued short-side profitability and short selling in these stocks.

We are seeing recent increased short selling in stocks such as Country Garden Holdings (2007 HK), XPeng Inc (9868 HK & XPEV US), Geely Automotive (175 HK), China Merchants Bank (3968 HK), Alibaba Group (BABA US), Ping An Insurance (2318 HK), Nio Inc (NIO US), JD.Com Inc (JD US), Galaxy Entertainment Group (27 HK), H.K. Exchanges Clearing Ltd (388 HK), Longfor Holdings (960 HK), New Oriental Education (EDU US), Casino Biologics (6185 HK), Sun Hung Kai Properties (16 HK) and Orient Overseas Intl (316 HK).

Shorts have been trimming their exposure and realizing some of their mark to market profits since May, but in early October we saw an uptick in short selling and recently more aggressive short selling into the declining region. Short selling should continue as stock prices decline in the region, but we may see a sudden and abrupt end to new short selling and return to short covering if the market makes a U-turn. With so much short-term mark-to-market profits on traders Profit & Loss reports we should see quick buy-to-covers in order to realize and pocket the profits they earned over the last few days.

Hong Kong / China: Short Selling Recap

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