A heavily shorted Chinese truck maker has emerged as the surprising winner among global stocks this month, trouncing cannabis growers and technology shares.
Sinotruk Hong Kong Ltd. has jumped 69% in September, the top gainer on the MSCI All-Country World Index, as optimism about its parent’s new chairman overshadowed a pessimistic outlook for the industry.
Shares were boosted by speculation that Tan Xuguang, who was appointed head of China National Heavy Duty Truck Group Co. on Aug. 31, will lift the company’s performance through acquisitions and restructuring, according to Wayne Fung, an analyst at CMB International Securities Ltd.
“Tan has a good track record of overseas acquisitions,” Fung said. The company had a net cash position of 10 billion yuan ($1.5 billion) at the end of June, he said. Calls to Sinotruk’s Hong Kong office went unanswered.
Adding to the positive sentiment was news last week that Volkswagen AG’s MAN unit, which has a stake in Sinotruk, agreed to create a joint venture to manufacture heavy-duty trucks.
There are a lot of skeptics still around. Short interest accounts for 35% of Sinotruk’s free float, the most among almost 500 Hong Kong-listed stocks, according to IHS Markit data. Short covering probably accounted for some of the rally, Fung said.
The stock slid 8.5% as of 1:23 p.m. in Hong Kong. Investors should be cautious, according to Toliver Ma, an analyst at Guotai Junan Securities Co. in Hong Kong.
“Its shares are overpriced as any restructuring is still uncertain,” Ma said.
The market is too optimistic on the joint venture and management changes, according to Morgan Stanley, which reiterated an underweight rating on the stock and trimmed its price target.