HONG KONG: Short-sellers are losing conviction on bets against BYD Co shares, which may continue to outperform other Chinese electric-vehicle (EV) stocks if its results this week are as good as expected.

Short interest in BYD’s Hong Kong-listed shares had dropped to 1.4% as of Aug 21 from a high of 7.7% earlier this year, according to S&P Global Inc data.

Bearish bets are now near the lowest level since July 2023.

The company sold a record of nearly one million electric and hybrid cars in the latest quarter despite cut-throat competition, boosting expectations for an earnings rebound after two quarters of sequential decline.

The stakes are high for China’s top EV maker after better-than-expected reports from rivals Geely Automobile Holdings Ltd and Xiaomi Corp.

“We anticipate BYD’s margins will continue to improve, supported by higher operating leverage,” said Bing Yuan, a fund manager at Edmond de Rothschild Asset Management.

The expected launch of new models in the current quarter “should further enhance market share and earnings visibility,” she added.

The company’s shares have gained more than 6% in Hong Kong so far this year, compared with losses in peers from Tesla Inc to Nio Inc.

BYD’s strong revenue growth has helped make its stock more resilient to concerns over diminished demand and the industry’s ruthless price cuts.

The Shenzhen-based company’s sales have gotten a lift from the popularity of its fifth-generation plug-in hybrid drive system.

The system was introduced in May.

The automaker’s aggressive moves to reduce prices across most models in China earlier this year to better compete with foreign gasoline models also boosted its domestic deliveries.

While sales within China are less profitable than exports, higher plant utilisation and other economies of scale have protected BYD’s overall margins.

 - Bloomberg