Short-seller Chanos: Moody's, S&P wrong on China

(Reuters) - Hedge fund manager James Chanos, who has been a long-time skeptic on the Chinese growth story, is sticking with his gloomy view of ratings agencies Moody's Corp (MCO.N) and Standard and Poor's, saying their rosy outlook on China's debt only bolsters his bearish bet.

The famed short-seller said he's puzzled by the readiness of S&P, a division of McGraw-Hill Companies Inc (MHP.N), to downgrade the sovereign debt of countries like the United States and much of Europe while continuing to give a nod of approval to China and its banks.

"The rating agencies are getting this one really wrong," Chanos, the founder and president of hedge fund Kynikos Associates, told the Reuters 2012 Investment Outlook Summit.

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"It is already happening," Chanos said, citing what he said is a drop in new apartment sales across the country of about 40 percent year-on-year. "Everybody is admitting transaction volumes have plummeted. This is what we saw in places like Las Vegas and Florida before the crash; transactions just stopped."

"We are short anyone involved in the China real estate boom," he added.

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OUTSIDE CHINA

The European banks have not escaped Chanos' glare, either. He has been short a number of European banks since the beginning of the year - before several nations enacted bans on short selling.

"The biggest commercial lenders in Europe are pretty much all in our portfolio," Chanos said, noting his skepticism that austerity measures will solve the debt crisis.

He has a more positive view, however, on the U.S. banking sector.

American banks "are not lending and their cost structures are still too high but that is not a death knell," Chanos said, although he is still noted caution. He is staying away from any U.S. banks with exposure to potentially vast mortgage write-downs. And while Kynikos is long Citigroup (C.N), Chanos emphasized that bet is a hedge against his short position on Chinese and European lenders.

The U.S. housing market isn't the only one that gives Chanos jitters. He recently visited Australia, where he was "stunned" at urban real estate prices. The housing market, in addition to the country's reliance on China to keep its economy afloat, is worrying, he said. Kynikos is short Australian miners.

"Australia has tied itself to the tiger's tail - I don't think that's a great place to be," Chanos said.

"But it is a lovely place to visit," he added. "I might go back for New Year's."