A recent surge in Chinese stocks has left traders betting against US-listed shares facing $6.9 billion in mark-to-market losses, according to S3 Partners. China’s CSI 300 index has jumped over 27% since mid-September, with policy-easing measures fueling the rise. At the same time, the Nasdaq Golden Dragon index, tracking US-listed Chinese companies, surged by over 36%, wiping out $3.7 billion in year-to-date profits for short sellers.
Before the rally, short sellers were profiting in a declining market, but now the tide has turned. Stocks like Alibaba and JD.com have been particularly challenging for those betting against them. However, some traders have remained profitable by shorting Nio, Li Auto, XPeng, and PDD Holdings.
If the market continues to climb, S3 anticipates a wave of short covering, which could drive prices even higher.