Event

　　Short positions in the H-Share financials, as measured by value of stocksshorted as a percentage of market cap, were back up to two-year highs as at13May, according to data released today by the SFC.

　　Impact

　　Selling in May, this year at least. Short positions in the H-Share financialswere 2.24% of market cap on May 13, 2015. This is the highest level sinceMarch 2014, when this ratio peaked at 2.44%. It is tempting to ascribe a “sellin May” effect, but our database – which is admittedly limited to four years’ ofhistorical numbers – does not indicate any such seasonal trend.

　　Banks in focus: Minsheng, Merchants, and ABC. Minsheng remains themost heavily shorted of the JSBs at 8% of market cap, with total sharesshorted creeping up 7% MoM. CMB saw a bigger increase in shares shortedat 18% MoM and 12% WoW leading up to May 13, which may help to explainthe recent share price weakness. CMB is now the third most shorted H-Sharefinancial at 6.4% of market cap. The Big Four banks don’t usually rate amention in this update, but we note that shorts in ABC rose 10% MoM just asADT declined 21%, so short positions are now 10.6days’ turnover.

　　Insurance stocks have also seen a high level of shorting interest. Ping Anremains the single most heavily shorted mainstream H-Share financial stock,with shares shorted equivalent to 11.9% of market cap and 25days’ ADT –but this is nothing new. However, we observe a notable increase in shortpositions in China Life, with total shares shorted up 55% MoM to reach 307million as at May 13(4.1% of market cap, vs 1.9% historical average).