Bearish bets last increased faster in March 2009, the same month the S&P 500 began a bull market that doubled its value. The surge in equity prices came seven months after NYSE short interest climbed to an all-time high in July 2008. The U.S. equity benchmark rose 2.1 percent to 1,155.46 last week.
"We have more shorts on today than we had six months ago," said Chris Baggini, a fund manager at Berwyn, Pennsylvania-based Turner Investment Partners Inc., which oversees about $18 billion. "We're finding more short ideas in the U.S. market that we think we can make money on in an environment that's slower than it was six months ago."
Baggini, who spoke in an Oct. 6 telephone interview, helps oversee the Turner Spectrum Fund that climbed 5.9 percent in the 12-months ended Oct. 6. The S&P 500 fell 0.2 percent in that period.
Bets that Hong Kong stocks will fall have risen to the highest level since January 2008 amid falling home sales in China and concern that the world's second-largest economy is slowing. Wagers on declines reached HK$12.8 billion ($1.6 billion) on Sept. 30, Hong Kong exchange data show. That's 14 percent of the total value traded on the city's stock market, the most since 1999.
The MSCI China Index of 148 stocks available to foreign investors has fallen 26 percent since Aug. 1. China's home prices fell 0.03 percent from a month earlier in September, the first decline in a year, said Soufun Holdings Ltd., the country's biggest real estate website owner. The central bank has raised interest rates five times in the past 12 months.
Alex Au, who helps oversee $300 million as managing director of Richland Capital Management Ltd. in Hong Kong, said he's "aggressively" shorting cement stocks on speculation spending on roads and factories will weaken. Anhui-based Anhui Conch Cement Co., China's largest producer, has lost 47 percent since its July 14 peak. The Richland Asia Absolute Return Fund rose 3 percent this year through Sept. 30, versus the MSCI Asia Pacific Index's 18 percent drop.
"The worst is yet to come," Au said in an Oct. 4 phone interview. "If you look at the fundamentals, you'll see that a lot of stocks are very cheap and you'll be tempted to bottom pick, but this is very dangerous."
Average short interest in Europe as a percentage of shares outstanding has climbed to 2.8 percent, the highest since June, from 2.6 percent at the beginning of September, according to Data Explorers. Regulators in Italy, Spain, France and Belgium banned new short sales on 66 financial firms on Aug. 11, when the Euro Stoxx Banks Index had plunged 33 percent this year.
Filippo Garbarino, who oversees $50 million as manager at Frontwave Capital Ltd. in Chiasso, Switzerland, said he has bet against shares of financial and publishing companies.
"The market is so undervalued right now it's kind of hard to take a short position," Garbarino said. "But at the same time given the economy, it is hard to be long."