Top China hedge fund seeks help to short besieged builder Vanke

One of China’s top-ranked hedge fund managers turned to social media as he sought to borrow shares for a bearish wager against China Vanke Co, the developer embroiled in a struggle for control with major shareholders.
Xin Yu, Beijing-based chairman of Ze Quan Investment, posted a message on his WeChat account that was later deleted, asking for “Vanke stock-financing resources,” using the Chinese term for shares borrowed for shorting purposes. “Friends who have please be quick to contact me,” according to the post.
“Want 1bn,” he wrote, without specifying whether he’s referring to the number or value of shares.
Ze Quan’s Jingbo Wealth run by Xin ranked as China’s best- performing stock fund during the nation’s $5tn stock- market rout last year after returning 129% in the June to August period. The money manager said in an interview last year that he exited near the top of the market on June 12. Ze Quan manages about 8bn yuan ($1.2bn), according to Shanghai Suntime Information Technology Co, which tracks Chinese hedge funds.
In a Wechat reply to Bloomberg News, Xin said “we’re just an ordinary investor in the secondary market, not involved in it,” referring to the tussle for control at Vanke.
Vanke’s mainland-traded A shares fell by their 10% daily limit for two consecutive days after resuming trading on Monday following a half-year suspension. The management of the nation’s biggest publicly traded developer has been mulling a restructuring aimed to fend off what it called a “hostile takeover” by little-known Baoneng Group.
The stock gained 0.1% on Wednesday after Baoneng, which displaced state-owned China Resources (Holdings) Co as Vanke’s largest shareholder last year, raised its stake further in the company this week.
The shares slumped 4.5% to 18.91 yuan in Shenzhen on Thursday, even after a Vanke filing late Wednesday that Baoneng units boosted their holding again, to 25%.
Investors sold 558,300 Vanke A shares short on the Shenzhen Stock Exchange on Wednesday, after two days without new bearish bets, bringing the outstanding bearish position on the company to 34.6mn yuan and making it the most-shorted stock on the bourse, according to the exchange’s website.
In Hong Kong, bearish bets on Vanke’s so-called H shares jumped to 3.2mn shares on Wednesday, an almost fivefold increase from the prior day.
Both Baoneng and China Resources are opposed to Vanke management’s proposal to issue new shares to Shenzhen Metro Group, and Baoneng has called for the removal of almost all Vanke board members including founder and Chairman Wang Shi.
Vanke’s management last month described the $6.9bn stock sale to Shenzhen Metro as a “life or death” matter as it seeks new ways to expand amid surging land costs.
The proposed transaction would have made the state-owned subway builder Vanke’s largest shareholder, and in return the developer would get assets to develop for property projects.
The decline in the A shares has helped narrow the gap with the developer’s Hong Kong-traded stock.
The gap almost doubled after the A shares stayed suspended, while the H shares tumbled about 28% this year.
The A shares are likely to decline by the 10% daily limit two or three more times to further shrink the discrepancy with the Hong Kong shares, Wang Ruizhe, a Shanghai-based analyst at Capital Securities Corp, said.
“Many friends today want to bottom-fish Vanke,” Xin wrote in a separate Wechat post on Wednesday. “Good luck to them!”