Shortsellers assembled for Hong Kong’s market tumble may have paid HK$12.4 billion for show that never was
- City’s top brokers built up positions in August, when the Hang Seng was down 7.4 per cent
- The benchmark has risen by more than 6 per cent in the first two weeks of September
Short sellers have been taking positions against Hong Kong, betting that the city’s stocks and currency peg to the US dollar would crumble as its worst political crisis in decades plunges its financial markets into chaos.
As many as 113,960 open positions held by the top 10 brokers on the city’s derivatives exchange were short as of the end of September 13, representing 82 per cent of all open short positions, according to data by Hong Kong Exchanges and Clearing (HKEX).
The brokers built up their position in August, when the Hang Seng was down 7.4 per cent, while the yuan’s deterioration past 7 per US dollar raised hopes the city’s equity and currency markets would decline further.
The index, however, rose 6.24 per cent in the first two weeks of September, while the Hong Kong dollar mostly stayed within its trading band against the US currency, much to the chagrin of stock market and currency bears such as Kyle Bass, Thomas Roderick and Kevin Smith, who have been talking down the markets since last month.
Such investors might have had their fingers burnt, as “they bet on the wrong side of the market”, said Louis Tse Ming-kwong, managing director at VC Asset Management.