Investors are Shorting These 5 Chinese Stocks

3. GDS Holdings Limited (NASDAQ:GDS)

Float Shorted: 5.45%

Number of Hedge Fund Holders: 26

GDS Holdings Limited (NASDAQ:GDS) is a developer and operator of data centers across China. As of July 14, 10.38 million shares of GDS Holdings Limited (NASDAQ:GDS) were held short. Based on the average daily trading volume of 1.32 million shares, it would take 8.22 days to cover all the short positions.

On July 29, Joel Ying at Nomura downgraded GDS Holdings Limited (NASDAQ:GDS) stock from a ‘Buy’ to a ‘Neutral’ rating. The company is expected to report its Q2 2022 results on August 23. Analysts anticipate GDS Holdings Limited (NASDAQ:GDS) to report an adjusted loss per share of $0.41, reflecting a year-over-year (YoY) decline of 46.4%. The revenue forecast for the company’s Q2 stands at $341.75 million. In the last six quarters, GDS Holdings Limited (NASDAQ:GDS) has missed EPS estimates on all six occasions and revenue estimates on two occasions.

Investors believe the increased regulation from Chinese authorities in regard to privacy laws and the challenging economic environment is expected to dent the stock price of GDS Holdings Limited (NASDAQ:GDS) in the near future.

Baron Funds echoed these sentiments in its Q4 2021 investor letter. Here’s what the investment management firm said:

“The Fund’s Core Growth investments were negatively impacted by the market rotation to value-oriented businesses. Fundamentals for most of our Core Growth holdings remain strong. We exited two positions in this space, which included GDS Holdings Limited. GDS, a Chinese data center, suffered from increased oversight and regulation from the Chinese government. While we still appreciate the long-term prospects for both businesses, we believe the current environment for both is difficult and uncertain.”