It’s About to Get Easier to Bet Against China's Biggest Hotpot Chain

(Bloomberg) -- It’s about to get easier for traders to make bearish wagers on China’s biggest listed hotpot restaurant chain.

Starting Friday, Haidilao International Holding Ltd. will be eligible for short selling on Hong Kong’s stock exchange, according to the city’s bourse. The $13.6 billion company has far outperformed the city’s benchmark with a 15 percent surge since its September debut through Tuesday, and is now trading close to analysts’ consensus price target, according to data compiled by Bloomberg.

With the lockup period expiring next month -- which would allow key investors to sell the stock -- there may be more pressure on the way. Speculation Haidilao will be eligible for short selling may have driven bearish over-the-counter bets and short interest spiked on the day of Hong Kong exchange’s announcement on Feb. 8, according to data from IHS Markit Ltd. It stood at 12.5 percent of the company’s free float on Monday.

Allowing short selling on the exchange would widen access to investors and traders by increasing the pool of shares that can be borrowed.

Haidilao shares fell as much as 2.5 percent in the city on Wednesday, set for their first decline in ten trading days. Twenty-eight other companies will also be eligible to be shorted on the exchange, including Hope Education Group Co. and BeiGene Ltd., while 47 will be removed from the list.

--With assistance from Sofia Horta e Costa.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, David Watkins, Philip Glamann

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