Photographer: Qilai Shen/Bloomberg

U.S. Bears Return to China With Shorts Circling $6 Billion ETFs

  • Bearish bets are climbing after falling to lows in March
  • Chinese offshore stocks traded at 2015 highs in past week

U.S. traders are turning more bearish on China after a rebound in the past month drove a multitude of its equity indexes to their 2015 highs. Short interest for three of the biggest exchange-traded funds tracking the country’s shares, which together hold about $6.1 billion in assets, has climbed since hitting lows in March.

In June, China stock investors have to reckon with the prospect of seasonally tighter liquidity and MSCI Inc.’s decision on whether to include A shares in its indexes. Both the MSCI China Index of offshore stocks and the FTSE China 50 Index -- which tracks the largest Chinese companies listed in Hong Kong -- are near 2015 highs, while the CSI 300 Index of mainland equities has rallied 7.1 percent since a low last month.

The MSCI China added 0.3 percent on Tuesday, bouncing back from its worst two-day decline in almost six months amid a selloff in technology shares worldwide.

Here’s how much money investors have yanked out of each fund this year:

  • iShares MSCI China: $167 million
  • iShares China Large-Cap: $113 million
  • Deutsche X-trackers Harvest CSI 300 China A-Shares: $45 million

Read also: Why China’s offshore stocks have fared so well in 2017

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