Alibaba Group Holding (BABA) earnings this week were strong as expected, and the short-sellers who borrowed the stock on the hunch that they could sell it back at a lower price were left to lick their wounds.
Alibaba shares rose 10.4% on the week, while the Emerging Markets Internet & Ecommerce ETF (EMQQ) and the Vanguard FTSE Emerging Markets ETF(VWO) rose 1.5%, and the iShares MSCI Emerging Markets ETF (EEM) rose 1.8%. The Vanguard EM indexes don't include Alibaba, while MSCI indexes do.
The short position in Alibaba is the largest in the Hong Kong/China region and worldwide, and is more than double the short interest in Tesla (TSLA), notes S3 Partners, a New York-based financial data analysis firm. With Alibaba shares up more than 90% this year, Alibaba is the worst-performing worldwide short so far this year, S3 notes
Alibaba short sellers were down about $2 billion this week in mark-to-market losses through midday Friday, bringing their year-to-date mark-to-market losses to $9.8 billion, or a decline of 66.4% for the year, S3 reports, adding:
"We track $79.2 billion of total short interest in the Hong Kong/China region and short interest continues to grow in the region, with an additional $178 million in new shorts over the last month. The largest increase was in the Internet Software & Services sector with $923 billion in growth, with Tencent Holdings(0700.HK) making up $831 million of this increase, while the Internet & Catalog Retail sector saw a $441 million reduction in short interest, with Ctrip.com ADR (CTRP) down $456 million.
... The chance of a price driven short squeeze for the larger shorts in the Hong Kong/Chinese market seems to be pretty slim. ... Short sellers are hoping that if there is stock market correction in Hong Kong/China, Alibaba will bear the brunt of the decline ..."
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