No Dip Buyers in Sight for Hong Kong Favorite Down 37 Percent

(Bloomberg) -- One of last year’s most painful short trades in Hong Kong may be finally paying off.

There seem to be no dip buyers in sight for AAC Technologies Holdings Inc., with the shares down for a record 12 days at their lowest price since August. Caught in the selloff that has slammed Apple Inc. suppliers this month, AAC is among the year’s worst performers on Hong Kong’s benchmark Hang Seng Index, and is down 37 percent from its November peak.

It’s been a swift reversal of fortune for a stock that almost doubled in 2017. While none of the 30 analysts tracked by Bloomberg recommend selling the shares, AAC saw a rare downgrade this week when Jefferies Group gave up telling clients to buy after almost eight months. The gap between Thursday’s price and the average 12-month target is now a yawning 64 percent, the widest since the stock’s 2005 listing.

AAC, which makes mini speakers and receivers for mobile phones, was targeted by short seller Gotham City Research last year when it questioned the company’s accounting and transactions. While the allegations are unrelated to this year’s selloff, that bearish bet would have been hugely profitable if Gotham founder Daniel Yu held on to it. Short interest is less than 1 percent of free float, compared with last year’s peak of 7.6 percent, according to IHS Markit Ltd. data.

Adding to selling pressure on Thursday were reports that U.S. agencies are probing Huawei Technologies Co. for possible violations of sanctions banning sales to Iran. AAC gets about 5 percent of its revenue from the Chinese company.

©2018 Bloomberg L.P.

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