U.S. Traders Rush to Hedge China ETF at Fastest Pace Since 2012

(Bloomberg) -- U.S. traders aren’t taking any chances on Chinese equities.

Short interest in the $3.1 billion iShares MSCI China exchange-traded fund, the largest tracking the benchmark, has jumped to more than 10 percent of shares outstanding, according to IHS Markit Ltd. data as of Monday. That compares to just 2.9 percent at the end of September, making it the biggest net increase in borrowed shares for such a period in almost six years.

While the gauge has already lost 28 percent since a January high, traders are pricing in a fresh leg lower in the yuan, as well as slowing economic growth and prospects that the Sino-U.S. spat will escalate. The benchmark, which has featured yuan-denominated stocks effective June, has also been hit by Tencent Holdings Ltd.’s steepest rout on record.

While U.S.-listed China stocks ETFs have attracted a net $3.9 billion this year, foreign investors’ appetite for the nation’s shares is starting to turn. They dumped A shares when onshore trading reopened Monday following a week-long holiday.

To contact the reporter on this story: Sofia Horta e Costa in Hong Kong at shortaecosta@bloomberg.net

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

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