Hedge funds dominated demand for Contemporary Amperex Technology Co Ltd’s $5bn share placement, with short covering playing a key role as traders moved to unwind bearish bets on the battery maker’s Hong Kong-listed stock, according to a report by Bloomberg.
The report cites unnamed people familiar with the transaction as revealing that hedge funds received more than $3bn worth of shares in Hong Kong’s largest deal of the year so far, with a significant portion of demand linked to investors closing out short positions.
The placement comes against the backdrop of an unusual pricing dynamic for CATL, where Hong Kong-listed shares have traded at a persistent and widening premium over the company’s Shenzhen-listed stock. This divergence has supported a popular relative-value trade betting that the gap would narrow.
Instead, CATL’s Hong Kong shares have surged to record premiums at times, creating losses for funds positioned for convergence even as the stock has rallied strongly since its Hong Kong debut last year.
Market data shows that CATL’s H-share premium has at times reached extreme levels rarely seen in dual-listed companies, with only a handful of such firms currently trading with higher valuations in Hong Kong than onshore China.
The imbalance helped fuel a buildup in short interest, with borrowing demand for Hong Kong-listed CATL shares becoming exceptionally tight. In some cases, borrowing costs reportedly reached 35%–45% annually, while utilisation levels remained near full capacity, underscoring the difficulty of sourcing stock to short.
The latest placement, priced at a discount to Hong Kong shares but above Shenzhen levels, provided an opportunity for hedge funds to reduce exposure, cover shorts, or exit positions with limited losses. Some newer entrants to the trade, who positioned ahead of the deal, are now understood to be sitting on double-digit gains.
The transaction also had a mechanical impact on the market, increasing available float and contributing to a sharp intraday decline in CATL’s Hong Kong shares following pricing, with the stock falling as much as 9% at one point.
Long-only investors showed limited appetite for the Hong Kong placement, given the elevated premium versus onshore shares, leaving hedge funds as the dominant marginal buyers.
