Short sellers have spent the past two weeks rushing for the exits in the EWT iShares MSCI Taiwan ETF, compressing what was a crowded bearish position into something far more modest — and the lending market is telling the same story in real time.
The unwind has been dramatic. Short interest fell 41% over the past week alone, dropping from roughly 13.7 million shares to 8.1 million, pulling the SI % of free float down to 7.7%. For context, that level was running close to 13–14 million shares through most of late April and the first week of May, a period that corresponded with peak trade-war anxiety around Taiwan's semiconductor supply chain. The catalyst appears clear: the broader US–China trade truce announced in mid-May lifted sentiment across Asia-Pacific equities, and short sellers positioned against Taiwan's tech-heavy index scrambled to cover.
The borrow market reflects exactly that retreat. Availability has loosened sharply — jumping to 130% from around 16% just two weeks ago on May 7, when barely one share was available to borrow for every six already lent out. Cost to borrow has followed, tumbling 36% on the week to 0.46%, less than half the levels seen in mid-April when it briefly touched 0.97%. That combination — availability expanding rapidly, cost falling — is the lending-market signature of a short cover wave, not new positioning. The ORTEX short score has fallen in lockstep, dropping from 66.5 to 56.9 over the past ten days, confirming the bearish conviction has eased considerably.
Options positioning has also shifted in a telling direction. The put/call ratio now runs at 1.05, sitting below its 20-day average of 1.29. That is a meaningful change: for most of late April and early May, the PCR was running between 1.5 and 2.2 as investors stacked downside protection against a potential tariff escalation. The current reading is nearly one standard deviation below that recent average, suggesting defensive demand has unwound alongside the short book.
The price action captures the tension neatly. EWT is down 4.2% on the week and 2.1% on the day to $89.83, even as the structural short cover continues. That divergence — shorts leaving while the price retreats — points to selling pressure from somewhere other than the futures or borrow markets, most likely spot ETF outflows from investors who bought the earlier rally. The Tennessee Department of Treasury, the largest disclosed holder with an 8.3% stake as of March 31, cut its position by nearly 2.9 million shares in Q1. BlackRock moved the other way, adding 1.85 million shares as of April 30.
The NVIDIA earnings cycle now sits directly in EWT's path. Taiwan Semiconductor Manufacturing is the ETF's dominant holding, and any signal from NVDA on AI accelerator demand — or supply chain constraints touching TSMC — will land directly on this fund. The spread between a still-elevated short score and a rapidly easing borrow market is what to watch: if shorts continue to cover but the price cannot recover, that gap will become the next chapter.
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