To start with let me educate my readers about 'Short Selling'. Short selling is a way of selling shares which the owner doesn't own still. The broker on behalf of the owner will buy or sell shares, and then it is upto the owner to keep it or close the trade, also called 'Covering'. The short selling is expensive for customers since they are charged interest on the Margin Balance accounts if they decide to hold any shares for long. So basically the customer has borrowed the shares from the broker and sold it and later you must pay back the broker any dividends or rights declared when holding the share loan.
Now coming to the news about Hong Kong topping the list of Short Sellers in Asia. According to a study by Data Explorers, a financing company, Hong Kong has taken over Japan's equities in short selling after banks, pensions and mutual funds reaped profits from loaning out Hong Kong shares. Investors are keen in investing in Chinese companies, showing a fading interest in Japan. The Singapore head of Asian regional strategy from the Royal Bank of Scotland Group Plc, Emil Wolter, thinks, :"As the Hong Kong market grows, there’s an increasing amount of activity that is not necessarily directional, like arbitrage, program trading and more complex trading strategies that are being put to work. Japan has been a market that’s been fading away for a long time and people are frustrated with it.”
It is good for Chinese companies and the economy as a whole for getting undivided attention from investors. Chinese companies are making moey for them and so investors are sticking to them.Lets hope short selling picks up like this India too.
(source: bloomberg.com & investopedia.com).
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