Hedge funds in Asia are taking what is viewed as a safe bet on Britain’s surprise vote to leave the European Union: by betting that shares of British bank HSBC Holdings plc (00005.HK) will fall, The Wall Street Journal reports.
More than 100 million Hong Kong-listed HSBC shares valued at HK$4.64 billion (US$597.6 million) were sold short on Friday, the Hong Kong stock exchange said.
That was more than a third of the stock’s total turnover and more than 12 times the average daily short-selling activity in HSBC shares in June.
On Monday, hedge funds continued to wager against the stock, with HK$1 billion of bets on further declines, three times June’s average daily level, exchange data showed.
HSBC shares have fallen about 8 percent from Thursday’s closing price before the vote.
On Monday, HSBC’s Hong Kong-listed shares fell 1.7 percent, to HK$46.65.
In short selling, traders borrow shares and sell them, hoping they can buy the shares back later at a lower price and return them, pocketing the difference as profit.
Hedge funds are betting against HSBC because as a big British bank it could suffer from the fallout of the country exiting the EU.
It also is a large-volume and easily traded stock in a region where markets can be thin and volatile.
The bearish bets dragged on the Hong Kong stock market on a day when most other Asian indexes bounced back from Friday’s global rout.
The Hang Seng Index, which counts HSBC as its second-biggest stock by market capitalization, fell 0.2 percent on Monday.
Japan’s Nikkei Stock Average climbed 2.4 percent, while Australia’s S&P/ASX 200 index rose 0.5 percent.
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