Surge in Zhongwang's Stock Baffles Short Sellers

Aluminium producer China Zhongwang Holdings, one of the most heavily bet-against stocks on the market, rallied 15.3% Wednesday to HK$8.07, a 39% rise in eight days that has baffled hedge fund short sellers, reports the South China Morning Post.


Short sellers sell borrowed stock which they hope to buy back at a cheaper price. Speaking on condition of anonymity, one short seller told the Post that he was baffled by Zhongwang's export sales. In its April listing prospectus, the firm said that less than 3% of its sales came from outside the mainland in 2008. By September, 25% of the sales came from overseas. "I am still scratching my head over how Zhongwang changed the complexion of its business so quickly," the short seller told the Post. Zhongwang finance director Vincent Cheung Lap-kei declined to comment.


Another concern is why Zhongwang chose not to make the Ernst & Young report into its share-sale document public, notes the Post.


The Post says that in a November 10 conference call with investors, Cheung hinted that his company would release the full report to the market. "We appointed [Ernst & Young] to give [the] result to [the] media, investors and [the] market," he said. On Wednesday, he declined to comment.


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