Hong Kong Short Selling of Stocks Surges to 13-Year High

Short-selling of stocks in Hong Kong surged yesterday to the highest level since 1999 amid concern Europe’s debt crisis will escalate.

The ratio of total short selling by value on Hong Kong’s mainboard versus the shares traded reached almost 1-to-7 yesterday, the highest level since Feb. 25, 1999, according to data compiled by Bloomberg. The benchmark Hang Seng Index declined 0.6 percent today.

“The bears are dominating the market,” said Alex Wong, asset-management director at Ample Capital Ltd. in Hong Kong. “We will probably see some rebound toward the end of this month. The U.S. is heading into a long weekend and during the weekend there will probably be some news coming out from Europe, so people will probably cover their positions.”

U.S. markets will be closed on May 28 for a holiday. European leaders, meeting in Brussels today to find ways to contain the region’s debt crisis, clashed over joint debt sales as they called on Greece to stick with the budget cuts needed to stay in the euro. An inconclusive May 6 ballot in Greece raised speculation it will scuttle austerity measures imposed upon the nation after two bailouts and will have to leave the single-currency bloc. New elections are due on June 17.

Futures on the Hang Seng Index slid 0.4 percent to 18,512, while the gauge’s volatility index rose 2.7 percent to 29.34, indicating traders expect a swing of about 8.4 percent in the benchmark index during the next 30 days.

Guangzhou R&F Properties Co. (2777) and China Shipping Container Lines Co. were the most-shorted stocks in Hong Kong relative to their shares outstanding, according to Data Explorers, a London-based research firm.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.