Banks based in mainland China and Taiwan were the most-shorted lenders in Asia-Pacific in the second quarter, continuing trends seen in the previous three-month period.
Five mainland Chinese lenders and 14 Taiwan-based peers were included in S&P Global Market Intelligence's latest list of the region's 25 most-shorted stocks. Postal Savings Bank of China Co. Ltd., the fifth-largest mainland Chinese bank by assets, topped the ranking, with short sellers holding 2.52% of its shares as of June 28, Market Intelligence's Securities Finance data shows. This compares to 2.41% in the first quarter when Postal Savings Bank was second.
China Merchants Bank Co. Ltd. also moved a notch up to the second spot, with its short positions rising to 1.96% from 1.51%. Three other mainland Chinese banks also saw their short positions rise: Chongqing Rural Commercial Bank Co. Ltd., to 0.77% from 0.32%; China Everbright Bank Co. Ltd., to 0.68% from 0.27%; and Agricultural Bank of China Ltd., to 0.51% from 0.33%.
Banks in mainland China face margin pressures as the central bank maintains an easing bias to support economic growth. The People's Bank of China cut its five-year loan prime rate, the mortgage benchmark, to an all-time low of 3.95% in February. This easing comes as the real estate sector, which accounts for nearly a quarter of mainland China's GDP, faces a downturn as a high number of unsold housing units and slow demand put pressure on builders.
Taiwan-based lenders Mega Financial Holding Co. Ltd., E.SUN Financial Holding Co. Ltd. and The Shanghai Commercial & Savings Bank Ltd. rounded off the top five after seeing their short positions rise quarter over quarter. Short positions at nine other Taiwan-based lenders also increased.
Banks in Taiwan could see flat profitability in 2024 and may maintain their interest margins as higher-for-longer interest rates persist, S&P Global Ratings said in a report. The banks are also expected to see slightly higher loan growth in 2024 compared to 2023, along with better GDP growth prospects for Taiwan. Credit costs are likely to rise slightly for the banks as the expiration of a loan moratorium program could slightly elevate their nonperforming asset recognition, Ratings said.
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Short sellers also continued to target South Korea-based KakaoBank Corp. and JB Financial Group Co. Ltd. during the second quarter, holding 0.92% and 0.77% of the banks' shares, respectively, as of June 28. DGB Financial Group Co. Ltd. and BNK Financial Group Inc. were the other two South Korean banks that made the list.
Short positions at the two Hong Kong-based banks Hang Seng Bank Ltd. and The Bank of East Asia Ltd. showed declines quarter over quarter. Short sellers held 0.92% of Hang Seng Bank's shares and 0.44% of Bank of East Asia's shares as of June 28.
The proportion of Asia-Pacific bank shares on loan to short sellers fell to 0.33% of total market capitalization as of June 28 from 0.37% as of March 29.