(CNBC) - Andrew Left, an American shortseller banned from trading in Hong Kong due to a terrible report he wrote Evergrande A few years ago, he told CNBC that the debt crisis of Chinese real estate developers was “after a long time.”
But he said he does not think the situation at Evergrande presents widespread problems to China.
Left, the founder of Citron Research, was banned from trading in the Hong Kong market after releasing a 2012 report that Evergrande predicted to go bankrupt soon.
His five-year ban ends next month.
“The situation at Evergrande has been going on for a long time and China had to remove it from their system. It’s not Lehman’s moment, it’s not systematic,” Left told CNBC in an email. rice field.
He mentioned the collapse of Lehman Brothers in 2008. It was the fourth largest investment bank in the world at the time and the largest corporate bankruptcy in US history. The bankruptcy spread to other banks and caused a global financial crisis.
In an email interview, Mr. Left said:
He mentioned the Hong Kong Securities and Futures Commission, Left claimed to have released the report Includes “falsely misleading” information about Evergrande, including his accusations when a real estate developer was engaged in accounting fraud.
Following the claim Hong Kong Market Fraud Court Concludes Left Convicted.. Referees are independent bodies that investigate cases of market fraud, such as insider trading and stock market manipulation.
I think China has a plan to eliminate this. It may not be cute, but it will take a long time and they will save the system bottom up.
Andrew Left
Founder of Citron Research
Left-wing accusations that Evergrande went bankrupt and committed accounting fraud appear to have never been proven. 2015 referee Refused his application to create records and documents From Evergrande.
Evergrande was unable to comment when contacted by CNBC. CNBC contacted the Hong Kong Securities and Futures Commission, which declined to comment on this report.
Evergrande’s growing crisis This week, the world’s most debt-rich developer, with $ 300 billion in debt, has shook the global market. The company is China’s second-largest developer in terms of sales, and has a strong presence in the country, reaching out to industries ranging from real estate to electric vehicles and healthcare services.
Evergrande said May defaultWith one big interest payment of $ 83 million to be paid on Thursday. Analysts also warn May be the default. Investors are watching the trend carefully as they fear the spread of the infection to other markets.
The left said Evergrande’s current liquidity crisis shows that he was right when he wrote a 52-page report in 2012. Make money from the difference.
“Ten years ago, I wrote how the company rushed to loosen its debt and used aggressive accounting to disguise its true financial position. The company’s pet project is all off-balance sheet lending. He continued to say that it cost billions of dollars, “Left said. ..
“Now everything I write is true and the Chinese people are suffering, which shows the importance of freedom of speech and market sales,” Left said.
Angry Chinese investors have appeared in protests in recent weeks, demanding the return of their money. Foreign investors, including the world’s leading asset managers, Evergrande will be able to pay Two interest payments, Thursday and next week.
“China has a plan” The left predicted that the crisis would wipe out the company’s stock. “In Evergrande, stocks are worthless and bonds are suspicious,” he said. Evergrande stocks have plummeted by more than 80% year-to-date, and bond yields have skyrocketed. Bond yields and prices move in opposite directions. The higher the yield, the lower the price of the bond. Chinese developers have serious problems, but Left said the impact is limited.
“Chinese banks will be hit by manageability and the public will land with government support,” he said. “I believe this is not systematic and will not affect future investment in China or Hong Kong. I think tech regulations are far more scary than this.” “I think China has plans to eliminate this. It may not be clean, but it has been around for a long time and they will save the system bottom-up,” he added. Left-wing counterargument to Hong Kong regulatory agency ruling On the left, trading on the Hong Kong stock market was banned in 2016 after the Hong Kong Market Fraud Court was found guilty of market fraud in connection with Evergrande’s report. The referee also ordered him to repay HK $ 1.6 million ($ 205,000) he made by shorting the stock. Here’s what Hong Kong regulators alleged he did, and his counter-arguments to each point:
1. Market fraud
Regulators have accused the market of left-wing illegal activity in publishing the report. In the report, he said Evergrande had gone bankrupt and was fooling investors. The referee stated that Left’s allegations were false and misleading.
The left said the report said Evergrande went bankrupt or “immediately” because the company’s liquidity “cannot handle” the amount of debt and off-balance sheet activity.
“I corroborated it with photos and testimony from national protests. Their claim was ridiculous. I think we’ll see it now,” he said, referring to the current liquidity crisis.
“Look at who is paying for it now. Poor employees and people who trust Evergrande in their deposits,” he said.
2. Lack of knowledge about local accounting practices
Regulators said Left had little knowledge of local accounting standards and financial reporting and did not check with experts or companies to confirm the information received.
He claimed to have used GAAP standards. This is a common set of accounting principles and standards issued by the Financial Accounting Standards Board of the United States and must be followed by US listed companies.
“The fact that I was using GAAP GAAP instead of Hong Kong accounting [standards] Report tones and messages are not invalidated at some data points, “he said. He told CNBC that when he faced the allegations, the court would not allow him to ask Evergrande’s Chief Financial Officer or the company. “I had a trial where I wasn’t even allowed to ask the company, which was more than one-sided,” he said.
The referee accused Left of failing to publish the report. The left claimed he was not negligent.
“If I were, are they going to sue all investment banks that have a $ 30 target for stocks that have generated huge banking fees without seeing the obvious?” He Asked by email. “It’s negligent.”
Adam Jeffrey | CNBC
