China Rally Spurs $7 Billion Loss For Short Sellers Of U.S.-Listed Stocks

The recent rally in Chinese stocks, driven by government stimulus measures, has caused significant losses for traders shorting U.S.-listed Chinese stocks.

China's CSI 300 index has surged more than 27% since mid-September, while the Nasdaq Golden Dragon index, which tracks U.S.-listed Chinese stocks, has jumped over 36%.

According to S3 Partners, traders betting against these stocks have incurred $6.9 billion in mark-to-market losses, as reported by Bloomberg’s Carmen Reinicke and Yiqin Shen.

China's CSI 300 index has surged more than 27% since mid-September, while the Nasdaq Golden Dragon index, which tracks U.S.-listed Chinese stocks, has jumped over 36%. These gains have erased approximately $3.7 billion in year-to-date profits for short sellers, leaving them with about $3.2 billion in paper losses.

Ihor Dusaniwsky, managing director of predictive analytics at S3, noted that before Beijing’s stimulus measures, short sellers were profiting from a declining market. However, since the rally, short selling has slowed down.

Many market observers had labeled Chinese stocks as “uninvestable” prior to the recent rebound.