Bearish traders lose big on milk
Betting against a loss-making Chinese milk producer is turning into a painful trade for short sellers.
China Modern Dairy Holdings Ltd has surged 81 percent since its July low, making it the third-best performer on an almost 500-member Hong Kong gauge. During that timeframe, short interest in the stock almost doubled to its highest level in 14 months, according to data compiled by IHS Markit Ltd and Bloomberg.
The steepness of the rally by the Maanshan, China-based company is surprising some analysts. There are twice as many sell ratings as buys on the company, which reported a loss in the first half of the year amid slowing Chinese demand for dairy products and rising competition. Investor confidence toward the industry has improved amid speculation milk prices will recover, according to Mizuho Securities Asia Ltd, while the stock surge may be forcing short sellers to return their borrowed shares at a higher price.
