Short selling in Hong Kong stocks has reached its lowest level in over three years, following a series of Chinese stimulus measures that have propelled a rally in the city’s stock market. As of Friday, turnover in short positions dropped to 9.7% of the market’s total, the lowest figure since April 2021, according to Bloomberg’s analysis of exchange data. This figure rebounded slightly to 10.7% on Monday.
The decline in short selling activity coincides with a 20% rebound in the benchmark Hang Seng Index since its September low, driven by a broader rally in Chinese stocks prompted by significant stimulus from Beijing. However, the initial excitement has waned somewhat, with investors now looking for more robust support measures, such as increased fiscal spending.
Billy Leung, an investment strategist at Global X ETFs, noted that the risk-reward ratio for Hong Kong and mainland Chinese equities has shifted toward the upside. “This means the risk of being short is greater now, leading to lower short selling positions,” he explained.
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