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FXI, the iShares China Large-Cap ETF, enters the second week of October with short sellers holding firm at elevated levels while the borrow market sends a clearer signal of easing pressure.
The cover that began in late August has stalled rather than reversed. Short interest now stands at 60.5 million shares, or 36.3% of free float, up 1.5% on the week after a small single-day dip on October 6. That weekly uptick is the first in several weeks and marks a pause in what had been an orderly retreat from the August peak above 69 million shares. The ORTEX short score of 67.9 remains well into elevated territory, placing FXI among the more heavily shorted instruments in the ETF universe. Bears have not pivoted; they have simply stopped covering at the same pace. The days-to-cover reading from the most recent FINRA fortnightly stands at 3.57 days, reflecting the sheer volume of short positions relative to average trading.
The borrow market, however, continues to loosen. Availability has climbed to 134.6% of short interest, up more than 54% on the week and the highest reading in several weeks. That means for every share currently borrowed by short sellers, lenders are offering more than one additional share. Cost to borrow has drifted back to roughly 1.03%, near the low end of its 30-day range despite a small weekly uptick. The 52-week availability low of just 0.26% is a reminder of how extreme the borrow squeeze was at the peak of short interest, the current reading is a different world. Looser availability at still-elevated short interest is consistent with a market where covering has moderated but conviction among remaining shorts is intact.
Options positioning adds a mild note of caution without screaming bearish conviction. The put/call ratio is running at 0.97, marginally above its 20-day average of 0.95, with a z-score of just 0.62. That is barely above neutral and well inside the past year's range of 0.72 to 1.23. Options traders are not rushing to hedge the way they were when the PCR spiked earlier this year. The muted reading suggests the broader market is watching China macro developments with attention rather than alarm.
Institutional ownership data confirms that the biggest holders are largely dealers and market-makers using FXI as a hedging vehicle rather than directional investors making a macro call. Morgan Stanley tops the register at 14.7% of shares, followed by Rafferty Asset Management at 6.1%, as of the most recent filings. Barclays more than doubled its position in the period ending June 30, adding over 6.4 million shares. D.E. Shaw and Nearwater Capital both appear to have built fresh positions in the same period, each reporting stakes not previously on the register. BlackRock Portfolio Management separately disclosed a 6.1% Schedule 13G stake via a July filing, a passive declaration with no activist intent. None of these movements change the fundamental read: FXI remains an instrument where positioning reflects macro views on Chinese equities rather than company-specific catalysts.
The stock itself has done little to resolve the debate. FXI closed at $33.77 on October 6, down just 0.26% on the day and essentially flat on the week, though the one-month return of negative 5.9% reflects a period of sustained pressure. What to watch is whether the weekly short interest uptick marks a genuine reassertion of bearish conviction or simply a pause before the covering resumes, with the borrow market's continued loosening the clearest datapoint in favour of the latter interpretation.
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Open FXI on ORTEX →ORTEX Market Intelligence content is generated by AI from a snapshot of ORTEX's proprietary data and reviewed by the ORTEX team. Content is informational only and does not constitute investment advice.
