How is Jim Chanos going to short China? (Australia: take note)

February 18th, 2010

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As we all know, the infamous short-seller (who made the famous short call on Enron), Jim Chanos, has declared publicly that he is shorting China. The question is, how is it possible for him to do so in a practical sense?

For one, there is no market mechanism to short Chinese A-shares in mainland China. Currently, the ability to short-sell shares in China is on a trial basis, with no exact time-table announced for a transition to a full basis. As this Financial Times article reported,

The regulator said it would follow the principle of ?test first, then expand?, and would select some companies to launch products on a trial basis.

But the statement left many questions unanswered, including which companies will participate, whether foreign groups will be included, and the exact timetable.

The only practical way to short China is to short-sell Chinese A-shares on the Hong Kong stock exchange.

But there’s another alternative. And that is…

No, we wouldn’t give the spoiler in this article. Watch this YouTube video clip below:

Please note this is not a recommendation to short-sell Australian miners tomorrow. This is for you to understand that the short-seller sharks like Jim Chanos are probably on the alert to pounce on Australian miners.

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