Short interest slumps on U.S.listed China stocks
Cheap and oversold market dials up riskreward equation
Allocation story is over; stock pickers reign investors

HONG KONG, Jan 24 Reuters Global investors aren39;t expecting much from China39;s economy this year, but some say the collapse in its already cheap stocks merits a wager on an eventual rebound and perhaps a new approach to investing in the market.

Measures such shrinking short positions, fund flows, options pricing and bounces on the main boards show investors have been selectively buying or at least curtailing bearish bets lately.

While a lot of longterm money has left, the selling that has driven the MSCI China index 60 lower in three years has opened a lopsided entry point if the mood shifts. Authorities have been promising increasingly strong measures to help.

Herald van der Linde, head of equity strategy for Asia Pacific at HSBC, forecasts 3040 gains for Chinese equities if and when the gloomy sentiment lifts. The Hang Seng had its best day in two months on Tuesday and has bounced 5 from Monday39;s 15month low.

Foreigners were net buyers of 4.8 billion yuan 677 million in Chinese equities on Monday and Tuesday this week.

While people are not necessarily very bullish on Hong Kong and China… they don39;t want to miss out those very concentrated 5 to 10 moves on the upside, said Jason Lui, head of APAC equity derivatives strategy at BNP Paribas.

Three years of losses have also left China the…