Deadline nears for many U.S-listed Chinese stocks
More than fifteen Chinese companies whose shares trade in the United States, many of them favored by short-sellers, have yet to file required year-end forms with U.S. regulators and the shares could face more downward pressure as deadlines approach.
Many of those names were included on lists issued by brokerages that prevented their clients from borrowing money to buy those stocks on margin. A rise in short activity indicates more people see the stocks falling amid a flurry of accounting scandals that have damaged the sector.
Some of these companies, if they are foreign issuers, would be required to file a 20-F report with the Securities and Exchange Commission by the end of June if their fiscal year ended December 31. Others that are considered U.S. companies have already delayed certain filings.
Short-sellers, who borrow stocks in anticipation they can sell them and then buy them back at a lower price, have been champing at the bit waiting for bad news from those that have not filed reports. They got some on Wednesday with one company, China-Biotics Inc
If there are any China names where there is any sense that there is stuff out there on them or there are concerns ... getting a 10-K signed on these names is not easy, said Roddy Boyd, editor of thefinancialinvestigator.com in Wilmington, North Carolina, a website that focuses on Chinese companies.
The 20-F form is a foreign issuer's version of a 10-K, which much be filed within six months of the end of the company's fiscal year.
Trading in shares of China-Biotics, the latest in a string of Chinese companies to disclose accounting issues in recent months, was halted after tumbling on Wednesday and has not traded since.
Bets against Chinese names have grown recently, with average short interest in about 80 Chinese companies traded on U.S. exchanges rising to 3.99 percent on January 3, the first trading day of the year, and climbing to 5.92 percent as of June 13, according to data provided by Data Explorers.
At this point, if a company is borderline on the sniff test, investors will try to leverage into it by shorting the position as it goes as low as possible, if not to zero, said Joseph Greco, managing director at Meridian Equity Partners in New York.
AutoChina International Ltd
Interest in shorting AutoChina has risen recently, with more than 85 percent of shares available to be borrowed out on loan, according to Data Explorers, compared with 57.6 percent on May 23 and less than 5 percent in early March. The stock is down 30 percent since a recent high reached on March 10.
Jason Wang, the company's chief financial officer, said he was aware the deadline was approaching but directed all further queries to the company's investor relations contact, who was out of the country and did not immediately return a request for a comment.
Concord Medical Services Holdings Limited
Investors have been more guarded over China since Sino-Forest Corp
Those high-profile allegations followed a number of similar charges against other Chinese names, which have led to delistings and steep stock drops.
On Thursday, shares of electric motor maker Harbin Electric
As a result of the growing controversies, Interactive Brokers Group
The SEC followed by issuing a bulletin of risk against investing in reverse merger companies, a category that includes many of the firms that have yet to file with the regulator.
While shares of many foreign companies traded on U.S. exchanges rose on Friday after France and Germany said they reached an outline agreement to aid debt-burdened Greece, Chinese stocks suffered another day of losses.
The BNY Mellon index of leading American Depositary Receipts (ADRs) <.BKADR> rose 0.7 percent, while the Asian index <.BKAS> fell 0.2 percent and the China index <.BKCN> dropped 0.3 percent.
Many traders are looking for a compounding effect given the downturn in the broader market, Meridian Equity's Greco said.
(Additional reporting by Clare Baldwin and David Gaffen)
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