Short Interest Soars in China to Highest Levels Since Last Debacle

People are shorting the great wall’d nation in size, via well coordinated ETF attacks. God willing, such bets will precede heinous drawdowns that will trap longs, not so different from a burning carnivale house. The last time short interest was this high, Chinese stocks shed $5 trillion in market cap.

Short interest in the CSOP FTSE China A50 ETF climbed to 6.1 percent on May 25, the highest level since April 2015, two months before Chinese equities peaked, and up from 1.3 percent at the end of last month. Bearish bets in the U.S. traded iShares China Large-Cap ETF jumped to a two-year high of 18 percent of shares outstanding on the same day, up from 3 percent a month ago, data compiled by Bloomberg and Markit show.

“Some macro funds are seeking opportunities to short index futures to play the currency movement,” said Wenjie Lu, Shanghai-based strategist at UBS Group AG. “A higher chance of a Fed rate hike means there’s pressure for the yuan to soften.”

Unlike other indices, the Shanghai is vacillating at the lows–off by more than 20% for the year–entrenched and mired in a bear market. There’s blood in the water, as evidenced by the yuan trading at 5 year lows and the large bets against equities.