Hong Kong Short Squeeze and Pair Trading Converge as US Stocks Reclaim AI Momentum

Source: 华尔街见闻 | 2026-07-12

PBoC Boosts Hong Kong: Foreign Reserves to Increase Allocation

This week, PBoC Governor Pan Gongsheng announced that China's foreign exchange reserves will continue to increase their asset allocation proportion in Hong Kong, driving Hong Kong stocks to their second consecutive week of significant rebound. The announcement came alongside 11 new measures to deepen financial cooperation between Hong Kong and mainland China, aimed at strengthening Hong Kong's fixed income and currency markets.

Short Squeeze Dynamics: Unprecedented Short Interest

Hong Kong's uncovered short positions as a percentage of market cap have slightly retreated from mid-June highs to 2.43%, but remain near three standard deviations above historical averages. Over the past two weeks, the leading gainers were sectors with the highest short interest: healthcare (4.07%), consumer discretionary (3.03%), and technology (2.83%). As external pressures ease, significant short covering potential remains.

Pair Trading Emerges: A/H Premium Dynamics

Alongside the short squeeze, clear pair trading signals have emerged in Hong Kong markets. Since the June 29th rebound, the A/H premium index has widened by 2.1%, with H-share premiums narrowing significantly for stocks like Montage Technology, GigaDevice, and CATL. Combined with RMB appreciation signals and continued southbound ETF outflows (cumulative 125.6 billion RMB since March 5th), pair trading is creating complex cross-market dynamics.

US Stocks: AI Momentum Trading Returns

US markets saw significant AI momentum trading resurgence this week. SK Hynix ADR rose 12.8% on its first trading day, validating continued AI hardware supply chain enthusiasm. Meta announced a C$13 billion data center investment in Canada, and Amazon filed for approximately $25 billion in bond issuance, signaling that tech giant capital expenditure remains resilient despite earlier concerns about spending slowdowns.

Sector Opportunities: Innovation Drugs, Aviation, Robotics

For Hong Kong markets, analysts recommend focusing on sectors with high fundamental certainty and event catalysts: innovative drugs (earnings resilience plus buyback support plus overseas BD), aviation (peak travel season plus falling oil prices), robotics (Optimus mass production catalyst), and industrial metals (high earnings growth plus declining rate expectations). These sectors offer compelling risk-reward profiles.

Crypto Market Implications and Binance Trading

The convergence of Hong Kong short squeeze dynamics and US AI momentum has implications for crypto markets. Improved risk appetite in traditional markets often correlates with increased crypto trading activity. Binance offers comprehensive crypto trading with 0.10% fees, up to 125x leverage, and a $100 sign-up bonus. The platform supports over 350 cryptocurrencies and provides advanced trading tools for capitalize on cross-market momentum.