Short seller Carson Block eyes Europe for stock targets

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By Svea Herbst-Bayliss and Lawrence Delevingne

NEW YORK, Feb 17 (Reuters) - Prominent short seller Carson Block is eyeing Europe and corporate bonds in his expanding hunt for securities that he expects will tumble.

Europe has caught Block's attention because he believes investors there do not scrutinize corporations and their management with the same vigor as in other parts of the world.

"You just find a lot of filth there," Block told Reuters when speaking of European securities on the sidelines of the Absolute Return Symposium in New York on Wednesday.

The short seller's publicly disclosed recent forays into Europe include a bet against French supermarket operator Casino Group, where Block is wagering the company's stock will fall because of its high debt burden.

He is also shorting the stock of Rallye SA (Paris: FR0000060618 - news) , the majority shareholder of Casino, and TeliaSonera (Amsterdam: 1087941.AS - news) , a dominant telephone company in Finland and Sweden.

Block recently launched a $100 million hedge fund after years of churning out research at his firm Muddy Waters LLC. He is best known for targeting the shares of China-based companies that he believed were frauds.

Block, a trained lawyer who started his career as an equity analyst, also said he expects become more active in shorting corporate bonds, something activists have generally shied away from.

Credits rated just above junk status, or BBB-, are a category of bonds where Block expects to find plenty of opportunity to find new short ideas.

"We are going to do more credit-based shorts going forward," Block said.

He also noted that he his avoiding shorting biotechnologies, addling they "do not make for good shorts" because the companies' scientific claims are hard to verify or discredit.

A lengthy research report in 2011 that alleged Chinese forestry company Sino (Dusseldorf: 1205802.DU - news) -Forest Corporation was a fraud cemented Block's reputation and he has since become a well-known name in the relatively small community of short sellers, or firms that focus on betting against securities.

He distributed the research for free and said that it took him years to create the hedge fund, which was officially born through a regulatory filing in January.

Even (Taiwan OTC: 6436.TWO - news) as his focus moves to other geographies, Block has not forgotten about Asia. "We always pay attention to China because we love to short stock frauds," he said.

Creating the hedge fund was a long time in coming, Block said, adding that for now, he is happy staying at a relatively small size. (Reporting by Svea Herbst-Bayliss, editing by G Crosse)