Hong Kong's Short-Seller Win Rate Is No Better Than a Coin TossBy
Targets buoyed by rising market, buying through exchange link
FG Alpha’s David plans one more Hong Kong report for 2017
It’s getting tougher for activist short sellers to take down stocks in Hong Kong.
While their success rate was 75 percent last year, activist shorts have seen just half of their targets in the city drop so far in 2017, according to data compiled by Bloomberg. Targets unveiled with much fanfare by Muddy Waters LLC and FG Alpha Management at the Sohn Hong Kong Conference in June have both gained.
Hong Kong’s surging stock market is one reason for the misfires: The Hang Seng Index was up 29 percent this year through Friday, more than twice as much as the S&P 500 Index. Share purchases by Chinese investors through the mainland’s exchange link with Hong Kong have also supported several targets, as has China Citic Bank Corp.’s willingness to extend credit lines to companies in the cross hairs. Most of the targeted firms have denied the short sellers’ allegations.
While Muddy Waters declined to comment, FG Alpha Chief Investment Officer Dan David said in a phone interview that he’s still finding short opportunities in Hong Kong. He plans to target at least one more company in the city before year-end. Appetite for shorting is not letting up: On Wednesday Iceberg Research issued a critical report on Tibet Water Resources Ltd. Shares rose 1.7 percent by the end of the week, after Tibet Water disputed the report and threatened legal action.