Stimulus policies have significantly boosted Chinese stocks, causing short sellers of U.S.-listed Chinese companies to face substantial losses. The Shanghai and Shenzhen 300 Index has surged over 27% from its recent low, while the Nasdaq Golden Dragon China Index has soared more than 36%.
According to a report by market analysis firm S3 Partners, this dramatic rise has wiped out approximately $3.7 billion in profits for short sellers and has created around $3.2 billion in paper losses. S3’s Ihor Dusaniwsky noted that short selling of Chinese stocks has declined since the robust rebound.
The biggest losses for short sellers came from Alibaba (BABA, Financial) and JD.com (JD). However, short sellers of Nio (NIO), Li Auto (LI), Xpeng (XPEV), and Pinduoduo (PDD) still managed to make some gains.
Despite the strong rebound in U.S.-listed Chinese stocks, short sellers have not been in a rush to cover their positions. S3 anticipates that if the market continues to rise, a large-scale short covering could occur, further driving up stock prices.
