China Stock Rout Drives Cost to Bet on ETF Drop to Record High
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If U.S. investors thought it was difficult to make money from the boom in China’s stock market, they’re probably finding it even tougher to try to profit from a bust.
At the current cost to borrow shares of the biggest U.S. exchange-traded fund investing in mainland stocks, short sellers need the equivalent of a 40 percent annualized drop just to break even, according to Markit, a London-based research firm. The 28 percent plunge in the Shanghai Composite Index from its bull market high and volatility at the highest level in 18 years have made it more expensive than ever to profit from declines in the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF as investors push bets against the fund to near a record.