Hang Seng, real estate and coal fuels HK short sellers
17 February 2016 London
Image: Shutterstock
Short sellers have zeroed in on Hang Seng Bank following the recent selloff, with its share price down 32 percent from its 2015 peak, according to Markit.
Markit attributed the drop to a pullout of overseas exchange-traded fund (ETF) investors worth $460 million year-to-date.
In response to this shorting interest in the bank has jumped by 25 percent since the start of the year.
More generally, larger companies on the index have seen a significant 23 percent increase in shares outstanding on loan, to sit just above 1 percent, according to Markit’s data.
Across the wider Hong Kong equity market, firms with at least $500 million in market capitalisation saw their average short interest increased during 2015’s selloff. It largely remained static, hovering around 1.2 percent.
“The Chinese market selloff of 2015 had until recently impacted Hong Kong blue chips to a lesser degree than mainland listed equities and the broader local market,” explained Markit.
“However, the continued sell off in global equity markets in 2016 has seen even the largest companies of the Hang Seng fall and close the gap on the declines seen on the mainland.”
“On a price return basis the iShares FTSE A50 China Tracker ETF and the Hang Seng Index ETF are down 32 percent and 35 percent respectively from highs reached in April 2015.”
“The Hang Seng Index ETF has fallen 16 percent year-to-date, more than double 2015’s decline of 7.2 percent”
This means Hang Seng has already lost its all of its 2013 and 2014 gains.
Markit also highlighted that, by sector, real estate companies made up 20 percent of the most shorted companies.
According to Markit, this is in part due to the disproportionate number of real estate companies above $500 million in market cap.
Real estate has seen on loan value fall by $677 million year-to-date, but, as Markit pointed out, half of this is explained by a reduction in short positions in China Vanke.
Short interest in the residential property developer has declined by almost two thirds from 2015 highs to 8.0 percent of shares outstanding on loan currently.
The most shorted company stock above the $500 million threshold is Yanzhou Coal Mining, which is enduring a 19 percent value loss year-to-date and currently has 12 percent of its shares outstanding on loan.
Just behind Yanzhou is China Coal Energy, which has lost 20 percent of stock value since the start of the year and has 9.5 percent of shares out on loan.
Despite these steep drops, Markit noted that demand to borrow remains strong indicating that short selling see further profits is yet to be made in the sector.
Markit attributed the drop to a pullout of overseas exchange-traded fund (ETF) investors worth $460 million year-to-date.
In response to this shorting interest in the bank has jumped by 25 percent since the start of the year.
More generally, larger companies on the index have seen a significant 23 percent increase in shares outstanding on loan, to sit just above 1 percent, according to Markit’s data.
Across the wider Hong Kong equity market, firms with at least $500 million in market capitalisation saw their average short interest increased during 2015’s selloff. It largely remained static, hovering around 1.2 percent.
“The Chinese market selloff of 2015 had until recently impacted Hong Kong blue chips to a lesser degree than mainland listed equities and the broader local market,” explained Markit.
“However, the continued sell off in global equity markets in 2016 has seen even the largest companies of the Hang Seng fall and close the gap on the declines seen on the mainland.”
“On a price return basis the iShares FTSE A50 China Tracker ETF and the Hang Seng Index ETF are down 32 percent and 35 percent respectively from highs reached in April 2015.”
“The Hang Seng Index ETF has fallen 16 percent year-to-date, more than double 2015’s decline of 7.2 percent”
This means Hang Seng has already lost its all of its 2013 and 2014 gains.
Markit also highlighted that, by sector, real estate companies made up 20 percent of the most shorted companies.
According to Markit, this is in part due to the disproportionate number of real estate companies above $500 million in market cap.
Real estate has seen on loan value fall by $677 million year-to-date, but, as Markit pointed out, half of this is explained by a reduction in short positions in China Vanke.
Short interest in the residential property developer has declined by almost two thirds from 2015 highs to 8.0 percent of shares outstanding on loan currently.
The most shorted company stock above the $500 million threshold is Yanzhou Coal Mining, which is enduring a 19 percent value loss year-to-date and currently has 12 percent of its shares outstanding on loan.
Just behind Yanzhou is China Coal Energy, which has lost 20 percent of stock value since the start of the year and has 9.5 percent of shares out on loan.
Despite these steep drops, Markit noted that demand to borrow remains strong indicating that short selling see further profits is yet to be made in the sector.
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