The short interest is about to explode—will Xiaomi's Q2 financial report make a severe counterattack on August 19?

1. The Truth Behind the Decline: A Well-Planned Short Attack

Recently, Xiaomi (1810.HK) shares have fallen nearly 10% from their peak. Many investors assumed this was due to weakening fundamentals, but HKEX data reveals another story: short interest surged significantly in the two weeks before the YU7 launch, with short-selling volume nearing annual highs. This is no coincidence—it’s an organized market maneuver.
The shorts’ logic is straightforward: exploit doubts about YU7’s conversion rate, potential slowdowns in smartphone recovery, and high valuations to depress the stock price before earnings, creating pessimism to profit from covering at lower levels if negative expectations materialize.

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2. Cracks in the Shorts’ Thesis Are Emerging

Yet reality is now turning against the shorts.
First, Q1 earnings proved Xiaomi’s profitability is on an upward trajectory: revenue jumped 27% YoY, net profit hit multi-year highs, and gross margins improved significantly, backed by growth in premium smartphones, IoT, and internet services.
Second, during the 618 shopping festival, Xiaomi saw broad success in domestic phone, IoT, and wearables sales, with premium models gaining share and smart home sales doubling YoY—laying the groundwork for Q2’s high-margin structure.
Most critically, the auto business continues to deliver in Q2: SU7 deliveries remain strong, order conversion rates in flagship stores are rising, and higher-margin trims are gaining traction, with margin improvements potentially exceeding expectations. Though YU7 hasn’t launched, its pre-sale momentum suggests Q2 auto revenue and orders could debunk the shorts’ “weak conversion” narrative.

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3. Earnings as a Potential Catalyst

If Q2 earnings beat top-end estimates across revenue, profit, and auto deliveries, it would dismantle the shorts’ core argument. High short positions would face forced covering if the stock breaks key resistance, potentially triggering a short squeeze.
Technically, the stock has found support at HK$51–52. A breakout above HK$56 could trigger widespread short stops. Earnings aren’t just a performance check—they’re an emotional tipping point.

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4. The Psychology of a Squeeze

Shorts expected earnings to crush bulls, but with positive signals accumulating, they now face the classic trap: “bad news fails → stock rebounds → forced covering.” Bulls are poised to exploit this—using earnings and sentiment to fuel a gap-up rally.
Such sentiment reversals often pack more punch than fundamentals. Once ignited, buying from FOMO and short covering can amplify gains, accelerating the uptrend.

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5. Conclusion: The Storm Approaches

Xiaomi’s recent drop reflects not fundamentals but pre-earnings short pressure. Yet Q1’s growth, 618’s sales surge, and auto execution are arming Q2 earnings for a counterattack. Any upside surprise could force massive short covering, with a squeeze potentially erupting within 24–48 hours.
For bulls, this may be a fundamentals-driven, sentiment-fueled reversal; for shorts, a self-inflicted crisis.