Qingmei Group Holdings

[peterlynch]

so end of story still worth 6cts?!! waos! :O

many penny stocks are highly manipulated. and we suffer for our naivety. lesson learned. move on we need to.
anyway, can some teach me how to short penny stocks?
what fees are involved. can't seemed to find any info.
remiser said i can't do it but i know many are doing..

[CityFarmer]

so end of story still worth 6cts?!! waos! :O

many penny stocks are highly manipulated. and we suffer for our naivety. lesson learned. move on we need to.
anyway, can some teach me how to short penny stocks?
what fees are involved. can't seemed to find any info.
remiser said i can't do it but i know many are doing..

I am not sure you aware of the shorting process? Your remiser may mean no naked short allowed which applies to all stocks

[peterlynch]

I am not sure you aware of the shorting process? Your remiser may mean no naked short allowed which applies to all stocks
[/quote]

ok. i am with dbs vickers. so let's say i sell qingmei at 0.064. i wait until the price drops to 0.05. I earn 0.014. is that correct? what else is involved?

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ok, managed to do some reading up. it seems like i must buy within 3 days after shorting or there will be a forced buy. is there any way i can keep the short position open for more than 3 days without suffering a penalty?

[CityFarmer]

ok. i am with dbs vickers. so let's say i sell qingmei at 0.064. i wait until the price drops to 0.05. I earn 0.014. is that correct? what else is involved?

---

ok, managed to do some reading up. it seems like i must buy within 3 days after shorting or there will be a forced buy. is there any way i can keep the short position open for more than 3 days without suffering a penalty?

You have described a naked short.

A legal short should starts with borrowing of shares. Talk to your remiser on borrowing of shares for shorting.

Are you sure you want to short? It is a risky stuff

[d.o.g.]

so let's say i sell qingmei at 0.064. i wait until the price drops to 0.05. I earn 0.014. is that correct? what else is involved?

You have to understand the settlement process. When person A buys from person B, there is an exchange of shares for cash. If you sell shares you do not have, you still have to deliver the shares somehow by the settlement date, typically T+2. If you do not deliver, the exchange will buy from someone else and use those shares to deliver to the buyer. It then imposes a fine on you for creating a failed trade.

If you want to avoid the penalty you need to obtain title to the shares BEFORE you sell them. Typically this means borrowing (taking possession of) the shares from someone who does own them. You have to pay them interest until you return the shares.

How do you borrow the shares? You have to either go through the stockbroker's Share Borrowing & Lending (SBL) program, or use a prime broker.

For SBL, the typical borrowing cost is 10% per year. Usually the SBL stocks come from CDP's lending pool. CDP charges 6%, the brokers add their own fees making it 10%.

Prime brokers like Goldman Sachs may charge as little as 1% per year, but the last time I talked to a prime broker, the starting amount before they will even consider opening an account is US$250k per year in fees. So unless your portfolio is at least US$50m, it's not likely you can get a prime broker.

A more involved question is how you can short S-chips. The short answer is that you can't. The long answer is that it cannot be done because you need to locate a pool of shares to borrow at a reasonable cost.

The CDP lending pool is very limited because it is an opt-in system, and most retail investors don't participate. Even if you do find shares to borrow, the cost is prohibitive at 10% per year. Only a fool or a rank amateur would borrow stock at a cost of 10% per year.

For institutional investors, the prime brokers draw on their own pool, which essentially consists of other institutional investors' holdings. Given the S-chip debacle of the last several years, there are almost no institutional investors today who hold S-chips. Ergo, there is also no pool of stock there to short either.

I hope this enlightens those who were hoping to short S-chips and make tons of money. This was actually possible in 2005-2007 when some S-chips were still popular among institutional investors e.g. Ferrochina, China Milk, Sino Environment, China Hongxing etc. You could borrow these shares and short-sell them, making good money when they collapsed later. But after the collapse all the funds got cold feet and sold out, so the short-sellers couldn't find any more scrip. I doubt if there is much short-selling now in the S-chips.

[safetyfirst]

wow precious knowledge and sharing.. shorting is not as easy as it seems

[peterlynch]

thank you very much, dog. after what my friend in fujian told me, i knew qingmei would collaspe. i quickly sold my shares and wanted to short it. and it went all the way down to 5 cents. i would have at least recover some of my losses. sigh...it can't be done unless it is T+3

[CityFarmer]

If shorting with volume of fund manager, i agree with d.o.g. that it is not possible due to the limited pool.

Base on latest info from CDP, the pool available are

QINGMEI GROUP HOLDINGS LIMITED 3,719,000

which is peanut to fund manager, but probably sufficient for retail investor

I am not encouraging short, especially for newbie retail investor, but to ensure balanced info in this forum

[peterlynch]

[quote='CityFarmer' pid='39635' dateline='1357695379']
If shorting with volume of fund manager, i agree with d.o.g. that it is not possible due to the limited pool.

Base on latest info from CDP, the pool available are

QINGMEI GROUP HOLDINGS LIMITED 3,719,000

does that mean retail investor can get hold of the 3719000 qingmei shares for shorting?

[CityFarmer]

If shorting with volume of fund manager, i agree with d.o.g. that it is not possible due to the limited pool.

Base on latest info from CDP, the pool available are

QINGMEI GROUP HOLDINGS LIMITED 3,719,000

does that mean retail investor can get hold of the 3719000 qingmei shares for shorting?

It is available to all retail investors subject to T&C. Talked to your broker for detail. You will be charged more than 6% p.a. CDP rate by your broker as highlighted by d.o.g