Short-sellers sense an opportunity as China trade tensions brew

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NEW YORK (Reuters) – Escalating trade tensions between Washington and Beijing may have sent tremors across the U.S. stock market but short-sellers are taking the opportunity to boost bearish bets against U.S. companies exposed to a full-blown trade war.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 19, 2018. REUTERS/Brendan McDermid – RC1560251B40

Planemaker Boeing (BA.N), automaker General Motors (GM.N), casino operator Las Vegas Sands (LVS.N), package delivery company FedEx Corp (FDX.N) and agricultural trader Bunge Ltd (BG.N) – companies that could feel the pain from growing trade tensions with China – have drawn a noticeable pickup in shorting activity this month, according to financial analytics firm S3 Partners.

“I think the change in short interest is directly related to the increase in trade tensions,” said Ihor Dusaniwsky, head of research at S3 in New York.

Short-sellers aim to profit by selling borrowed shares with the hope of buying them back later at a lower price.

On Friday, U.S. President Donald Trump said he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, and Beijing immediately vowed to respond in kind.

Tensions escalated further on Monday, after Trump threatened to hit $200 billion of Chinese imports with 10 percent tariffs if Beijing retaliated.

Multinationals that rely on China for large parts of their business are seen as particularly at risk from a potential trade war.

Boeing, the single largest U.S. exporter to China, saw a 3 percent increase in short interest in June, while short interest for General Motors jumped by 12 percent, according to the S3 data.

Short interest at FedEx, which is often considered a bellwether for the U.S. economy, and whose shares have come under pressure due to the growing threat of a trade war, grew by 8 percent this month, the data showed.

Toughened glass and optical fiber maker Corning Inc (GLW.N) also logged a 4 percent increase in short interest.

Las Vegas Sands, which generates a large chunk of its revenue from the Chinese special administrative region of Macau, saw a 20 percent increase in short interest this month.

Chipmakers, who as a group tend to rely on China for a large part of their revenue, were also in short-sellers’ crosshairs. Nvidia (NVDA.O) and Micron Technology Inc (MU.O) are among stocks that have seen the largest increase in short interest since Friday.

Reporting by Saqib Iqbal Ahmed; Editing by Alden Bentley and Rosalba O’Brien

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