Investors are Shorting These 5 Chinese Stocks

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In this article, we discuss the 5 Chinese stocks investors are shorting. If you want to read our discussion on the turmoil in the Chinese economy, go directly to Investors are Shorting These 10 Chinese Stocks.

5. KE Holdings Inc. (NYSE:BEKE)

Float Shorted: 2.43%

Number of Hedge Fund Holders: 34

KE Holdings Inc. (NYSE:BEKE) is a Chinese provider of online and offline housing brokerage services. Beike and Lianja are two of the biggest and most popular online real estate transaction platforms in KE Holdings’ portfolio.

KE Holdings Inc. (NYSE:BEKE) was backed by Softbank Group Corp, but the Japanese diversified financial services firm exited its position in the company during Q2 2022, a period during which KE Holdings Inc. (NYSE:BEKE) reported a record net loss of $23.4 billion.

In December 2021, Muddy Waters revealed its short position in KE Holdings Inc. (NYSE:BEKE) and accused the company of overvaluing its assets and the gross transaction value of its home sales. While KE Holdings Inc. (NYSE:BEKE) refuted the claims, concerns related to the company’s valuation haven’t subsided. KE Holdings Inc. (NYSE:BEKE) is said to be overvalued, trading at 35.4x its 2022 earnings.

Furthermore, KE Holdings Inc. (NYSE:BEKE) has predicted that the residential real estate market will decline over the next 15 years due to the aging population. The Chinese population dependency support ratio peaked in 2010, and there have been instances in Japan and Korea where housing markets declined once the population dependency support ratio peaked. Due to these factors, investors are bearish on the stock’s long-term outlook.

In its Q3 2021 investor letter, Tao Value discussed its outlook on KE Holdings Inc. (NYSE:BEKE). Here’s what the firm said:

“As witnessed in the past quarter, the government intervention in Chinese private sector is elevated to an unprecedented level. Given this background, I thoroughly reviewed all our Chinese holdings and made a few changes. We exited KE holdings (ticker: BEKE), for high potential regulatory risk and the passing of the visionary founder & CEO Zuo Hui (who was a core tenet of our original thesis).”

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