Mainland business chiefs slam Citron Research over 'lies'

PUBLISHED : Wednesday, 05 September, 2012, 12:00am
UPDATED : Wednesday, 05 September, 2012, 1:37am

A group of 61 Chinese entrepreneurs and executives have signed an open letter accusing Citron Research and other short-sellers of manipulating information and misleading investors in reports about Chinese companies.

Short-sellers "take advantage of the information asymmetry between China and the United States and boldly tell lies, knowing that their American readers have no way of verifying them", states the letter, which has been posted to an English-language website created for an "ongoing fight against" short-sellers.

Executives who signed the letter include Lee Kai-fu, former head of Google's operations in China, and Zhang Yaqin, president of Microsoft's research and development in Asia.

The iShares FTSE China 25 Index Fund, the biggest Chinese exchange-traded fund in the US, has fallen 5.2 per cent this year as Citron, Muddy Waters and other short-sellers publishedreports on companies including New Oriental Education & Technology. The S&P 500 Index has gained 11.9 per cent during the period.

In response, Citron said the "attack" ignored its track record of "exposing wrongdoing in both Chinese and US companies". Short-selling involves the sale of borrowed stock to profit from a subsequent decline.

Citron's recent targets include Evergrande Real Estate, which last month reported a 21 per cent decline in its first-half underlying profit. In a June report, Citron said the Chinese developer "has used accounting tricks and bribes to hide the fact that it is truly insolvent".

Evergrande denied the report and filed a police report in Hong Kong over the allegations.