FXI enters the back half of May with a borrow market that has effectively seized — and short interest climbing to levels that make this one of the most pressured large China-exposure vehicles in the market right now.
The lending environment has undergone a dramatic shift in just one week. Availability has collapsed to 7%, down from roughly 79% on May 12 and above 200% as recently as late April. Every share in the pool is now nearly fully committed, with only 7 available for every 100 already borrowed — the tightest the borrow market has been across this entire six-week window. Cost to borrow has moved with it, rising roughly 26% over the past week to 0.77% annually. That remains low in absolute terms, but the direction is clear: the lending market is tightening fast as demand for short exposure overwhelms supply.
Short interest itself has accelerated through that tightening. At 27.6% of free float — up 8.9% over the past week and now the highest reading in the 30-day history — the position is genuinely heavy. From early May, when SI ran at roughly 42 million shares and appeared relatively stable, the past five trading days saw a sharp step-change. Shorts added more than 4 million shares between May 12 and May 19. The ORTEX short score of 67.9 reinforces the picture: elevated and still drifting higher through this week's sessions.
Options positioning tells the opposite story, and the divergence is the week's central tension. Call demand has reasserted itself. The put/call ratio is running at 0.90, now more than one standard deviation below its 20-day average of 1.02. Compared to late April and early May — when the PCR was consistently above 1.10 — this represents a material rotation toward bullish positioning. The ETF closed at $36.28 on Tuesday, down 2.8% on the week after last week's trade-optimism rally to $37.33. Yet options traders are not abandoning the bullish case; the PCR remains closer to its 52-week low of 0.71 than its high of 1.43.
Institutional flows add a further layer of nuance. Morgan Stanley is the largest holder, with a 14.1% stake — but it trimmed by 4.7 million shares in the March quarter. UBS cut even more aggressively, reducing by 9.2 million shares over the same period. Against that, Citigroup added 6.3 million shares, Goldman Sachs added 2.9 million, and Old Mission Capital, a market-making firm, built a position of 5.4 million from near zero. The net picture is one where traditional asset managers reduced exposure while banks and market participants with shorter horizons stepped in — consistent with a fund being used increasingly as a trading vehicle rather than a long-term allocation.
Analyst data for this ETF is extremely stale and has been excluded. The fund's own price history offers some reference: the most recent comparable event recorded in the data was April 7, 2025, when the fund fell 9.6% in a single session before recovering 1.9% over the following week — a sharp dislocation driven by macro shock rather than fundamental re-rating. The April 7, 2026 annotation shows a much calmer 2.3% gain and a 3.8% five-day move, consistent with the post-tariff truce positioning that dominated that period.
With borrow availability now critically tight, the key dynamic to monitor is whether shorts can hold and build their positions at current cost levels, or whether the lack of available supply forces a reconfiguration — particularly if the macro news flow from US-China trade negotiations shifts again.
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