Carson Block is hedging against the debt portfolio of Standard Chartered Plc, saying that the UK bank is earning most of its profits from Asia due to its loan quality deterioration. Carson Block is the short seller who operates Muddy Waters LLC.
In a conference held in Las Vegas last May 10, Block said, "We think the market misunderstands the amount of risk that's presently in the book," He added that the red flags include a US$1 billion loan to Samin Tan, the chairman of Bumi Plc. Bumi Plc is a coal company that is being fought over by co-founders Nathaniel Rothschild and the Bakrie family of Indonesia. Another loan that is problematic was the one given to Far East Energy Corp.
Block had previously targeted Olam International Ltd, the Singaporean commodities trader. Now, he is focusing on Standard Chartered after Olam recovered with backing of Temasek Holdings Pte.
He also identified that the slowdown of the Chinese economy would lead to 'considerable stress' with Standard Chartered, resulting in 1.3% drop in the British bank's shares in Hong Kong's bourse today.
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