Muddy Waters indeed. Short-selling Chinese stocks.

Muddy Waters, Carson Block, and others have led the vanguard in exposing some problems with Chinese companies listed in North America. Sino-Forest (TRE.TO) has seen a plunge in market cap after reports indicating that its lumber holdings are dramatically overstated.  This has occured in an investment environment that has already soured on Chinese companies listed in North America.  See my earlier comments about this.

While I frequently work with directly listed North American companies that have assets in China, I also do confidential due diligence work for institutional investors.  This can be either pre- or post-investment.     Although I adhere strictly to confidentiality, and in some cases do not even know the ultimate client for my report, I do not knowingly prepare reports for short sellers, and make every effort to ensure that they are not the recipients of my research.  Although I appreciate that short-selling is a necessary aspect of liquidity, some aspects of it I find troubling.

Here is the Economist's article from July 9, 2011. Red-flag rises