Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Hong Kong short sellers, you have a new challenge -- banks and bullish analysts.

Two days after Muddy Waters LLC's Carson Block unveiled Man Wah Holdings Ltd. as a target, its shares were headed back toward their HK$7.89 record. Same with AAC Technologies Holdings Inc., a supplier of components to Apple Inc. that was earlier this year in the cross-hairs of Gotham City Research. Its stock rose as much as 4.7 percent Friday.

Defying the Shorts
Shares in AAC Technologies and Man Wah have outperformed the benchmark Hang Seng Index
Source: Bloomberg

Issuing a strenuous denial is one way to win back fans. Man Wah said in a statement that Muddy Waters' allegations were "groundless" and contained "obvious factual errors." In an oblique reference to two other companies that have recently been the target of short sellers -- China Huishan Dairy Holdings Co. and Fullshare Holdings Ltd. -- Man Wah said its controlling shareholder hasn't pledged any stock to third parties.

Opposites Attract
Hong Kong has become a hot bed for stocks that are targeted by short sellers
Source: IHS Markit Ltd.

But brokerage analysts also play a part. Daiwa Capital Markets reiterated its buy rating on Man Wah Thursday, noting the sofa maker pays generous dividends. Macquarie Research upgraded its recommendation to outperform from neutral, and by the end of the week, Man Wah had 12 buy calls, four holds and zero sell.

AAC Technologies has 25 buy recommendations, 10 holds and two sells. The day Gotham City Research released its report into the company on May 11, 26 analysts thought the stock was a buy.

If firms can't rely on analyst support, there's always state lenders.

China Citic Bank Corp. offered a 10 billion yuan ($1.5 billion) line of credit to AAC Technologies last week, having extended a similar lifeline to Fullshare in May. Fullshare, the subject of a Glaucus Research Group report in April, is down 13 percent year-to-date and has a single analyst that likes it.

Such support from various corners adds uncertainty for short sellers, even as they reap large gains. CIMB Group Holdings Bhd. regards a short seller attack as successful if it leads to one or more of the following; delisting; long-term trade suspension; or a notable drop in share price. By that definition, shorts have been victorious about 80 percent of the time when the 31 Hong Kong publicly traded firms that have come under fire since 2011 are considered.

Get Shorty
The number of campaigns against Hong Kong companies reached a high last year
Source: Activist Insight
Note: Data show campaigns started by short sellers on Hong Kong listed or headquartered companies.

It's becoming increasingly imperative that short sellers have watertight cases, as Andrew Left of Citron Research discovered when he was banned for five years and fined after a Hong Kong tribunal found he published false and/or misleading information about China Evergrande Group. The developer's shares have risen 213 percent over the past 12 months and touched a record HK$16.66 last week.

Meanwhile, stock detractors can add optimistic analysts and benevolent state banks to their list of challenges.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Nisha Gopalan in Hong Kong at

To contact the editor responsible for this story:
Katrina Nicholas at