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New Oriental Jumps to July High on Muddy Waters’ Backdown

Nov. 29 (Bloomberg) -- New Oriental Education & Technology Group Inc. surged to a four-month high in New York on speculation short seller Carson Block’s retreat from Chinese equities is bolstering confidence in the stock.

Shares of New Oriental jumped 8.3 percent to $20.96 in New York, the highest level since July 16. The Beijing-based education services provider was the second-biggest gainer on the Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S., which rose 0.4 percent.

Block, who has alleged Chinese companies listed in North America misstated earnings and assets and has bet on their declines, said in a Bloomberg TV interview Nov. 27 that he had lost interest in short-selling the stocks, claiming the government works with companies to conceal fraud. Block, the founder and research director of Muddy Waters LLC, said in July that New Oriental inflated its cash balances to gain approval from its auditor, spurring the stock’s slide to a five-year low.

“It would be a very big relief for New Oriental investors to see Muddy Waters getting out of China,” Ella Ji, an analyst at Oppenheimer & Co. in New York who rates New Oriental the equivalent of buy, said by phone today. “A big overhang just removed itself. This shows that very likely Muddy Waters doesn’t really have any more evidence.”

New Oriental said in September that a committee made up of three independent directors of the company found no evidence to support accounting fraud allegations made by Muddy Waters. Block countered the results by saying he was “more convinced than ever” that the company was misleading investors.

Carly Westerman at public relations firm Brunswick Group LLP said by phone in New York today that she would relay a request for comment to New Oriental’s management in Beijing. New Oriental has gained 10 percent in the past three days.

To contact the reporter on this story: Victoria Stilwell in New York at vstilwell1@bloomberg.net

To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net

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