Carson Block says it’s become too difficult to short Chinese equities in the U.S. as bets on stock declines drop by 50 percent from a year ago.
Block, known for his allegations that Chinese companies traded in North America engaged in accounting fraud, said in an interview yesterday that he’s lost interest in betting against the stocks because the government helps protect them. Short interest in the 83 biggest Chinese firms listed in New York has dropped to an average 2.61 percent of the total outstanding, from 5.22 percent a year ago, data compiled by Bloomberg and the U.K. researcher Markit show....“Investors will be more comfortable knowing that the threat of short seller attacks is a lot less than it used to be and a lot of companies have stepped up their corporate governance,” Kevin Pollack, a managing director at Paragon Capital in New York, which invests in Chinese stocks, said by phone yesterday. “The fact a guy like Carson Block isn’t aggressively shorting companies hopefully will lead to more investor interest that otherwise would have been scared away.”
..China began limiting access to corporate filings at the State Administration for Industry and Commerce this year after short sellers used them to highlight accounting discrepancies in companies listed abroad, lawyers including Nathan Bush, a Beijing-based partner at the law firm O’Melveny & Myers LLP, said in interviews in June.
“China has gotten harder in the sense that the government has really taken the side of the fraud,” Block said in an interview on with Stephanie Ruhle and Tom Keene on Bloomberg Television’s “Market Makers.” “The government is working with a number of these companies to try to conceal records that are public. When you are up against that sort of strength of the ability to revise history, it becomes difficult. That is one of the reasons we’re not that interested in China anymore.”