The collapse of U.S.-based hedge fund Archegos Capital and central government crackdowns have delivered selective relief to investors attacking Chinese shares in New York. They should be cautious: petesweeneypro:
In 2011, short sellers like Carson Block of Muddy Waters and Andrew Left of Citron Research made vast profits publishing negative reports about dodgy accounting practices among Chinese companies that had listed in the United States.
Their job got harder as targets learned the art of the squeeze, in which traders push up the price of a heavily shorted security, forcing investors to exit positions to cut losses. They were assisted by Chinese cash that has quietly poured into American equities through an official programme which has issued $147 billion in quota and through illicit routes. The Rhodium Group estimates Chinese investors held $700 billion of U.S. stocks in 2020, three times official figures.
This explains how Chinese stocks often manage to post big rallies soon after being attacked. Block called education technology firm GSX a near total fraud on May 18, 2020, having taken a position at $35 per share. GSX denied the allegations, and the shares rocketed up 331% in 57 days. The company has since renamed itself Gaotu TecheduBoth trades paid off in the end, but not because the market was convinced by sceptical reports.
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