Short-seller Carson Block has gained fame as "an alarm bell for investors in Chinese companies", as The Economist puts it. Block, 36, set up a Shanghai storage company and co-wrote Doing Business in China for Dummies before founding Muddy Waters Research in 2010.
The group's detailed research on apparent financial irregularities at US-listed Chinese firms is credited with wiping around $7bn off the value of the eight stocks it targeted as strong sells', and prompting formal investigations by regulators.
Block's highest-profile scalp was lumber group Sino-Forest, which Muddy Waters accused of misrepresenting its timber holdings. A consequent fraud investigation drove it into bankruptcy.
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Thanks to Carson's "uncanny accuracy in developing targets to short, experts in the industry think he's much better than the [US Securities and Exchange Commission] at catching fraudsters in the act", says Lucas Kawa on Businessinsider.com.
Now he has turned his attention to Standard Chartered, widely deemed one of the safest banks. He is shorting its debt because he reckons that "the market misunderstands the amount of risk" it has taken on.
A "real red flag" is a $1bn loan to Bumi, a coal group under investigation last year for alleged financial irregularities. Standard Chartered also looks too exposed to mining, according to Block.
Moreover, its exposure to China means that "this is a very nice way to play the eventuality of the China unwind", says Block. China is "a massive asset bubble", and this puts resource-based emerging-market countries and Australia, Canada and New Zealand "at direct risk".
Chinese banks are riddled with more potentially toxic loans than their US counterparts were in 2008. That won't be fixed quickly. The state will probably prop them up with printed money, with "dire consequences for the economy".
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