* Citron Research claims Evergrande is insolvent
* Accusations of accounting tricks, bribery "untrue" - Evergrande
* Shares drop as much as 20 pct in heavy trading
(Adds fund manager quotes, background, updates shares)
By Alex Frew McMillan
HONG KONG, June 21 (Reuters) - Around $1 billion was wiped off Evergrande Real Estate Group Ltd's <3333.HK> market value on Thursday after short-seller Citron Research said China's second-largest property developer was insolvent and accused it of bribery.
In a brief statement, Evergrande said the accusations of accounting tricks and bribery to hide its insolvency were untrue, adding it would issue a fuller statement in due course.
Citron Research, run by Andrew Left from his Beverley Hills, California home, is known for targeting companies with research exposing what it claims are financial irregularities. Last year, U.S.-listed Chinese company Harbin Electric took itself private after a year-long battle against Citron's fraud allegations.
In its June 20 report, published in English and Chinese on its web site, Citron accused Evergrande of presenting "fraudulent information", and said the stock was a "good short opportunity."
Chinese property firms face scrutiny over their debt levels, with home prices falling after more than two years of restrictions by Beijing, and after a string of accounting scandals. Many smaller developers could be forced out of business as growth slows, analysts have said, but this is a rare case of a mainland property company being accused of outright financial mismanagement.
"It's certainly alarming - the report is pretty straightforward," said one property fund manager in Hong Kong, who did not want to be identified, but has a position in Evergrande stock. "There are things we want to hear from management," the fund manager added. "I'm sure they will have their side of the story to tell."
Guangzhou-based Evergrande is 63 percent-owned by its chairman Hui Ka Yan, according to Thomson Reuters data, and sponsors big-spending soccer team Guangzhou Evergrande, which last month hired former Italy national coach Marcello Lippi as manager.
Shares in Evergrande, valued at more than $8.6 billion at Wednesday's close, slumped by as much as a fifth to a near 5-week low of HK$3.60 in Hong Kong before closing down 11.4 percent at HK$3.97. Trading was the heaviest in almost a year.
Short-sellers have found China fertile hunting ground.
Canada-listed Chinese forestry company Sino-Forest Corp <TRE.TO> filed for bankruptcy protection after short-seller Muddy Waters accused it last June of exaggerating the size of its forestry assets. [ID:nL2E8FDEXM] Sino-Forest faces several class-action lawsuits from investors who lost money after its shares fell 80 percent. The stock is being delisted in Toronto, and there are ongoing investigations by regulators and police.
AGGRESSIVE
Evergrande, which focuses on mid-range and affordable housing in smaller Chinese cities, has grown aggressively using debt to fund land purchases, though its acquisitions have slowed. It posted sales of 10.4 billion yuan in May, a record for the company in a single month.
The company had the largest land bank of any Chinese developer at the end of last year, at 137 million square metres, but paused its purchasing when investors raised a red flag over its gearing ratio, which hit 75 percent. [ID:nL3E7ND2ZC] Earlier this week it bought a plot in Guangzhou for 1.32 billion yuan.
Citron alleged that Evergrande acquired its land bank at a deep discount by bribing local officials, accusations the company denies.
"We're not saying this is true, but it's also difficult to charge or defend in nature," Alfred Lau, property analyst at Bocom International, told Reuters in an email, noting Evergrande is the only Chinese developer building such a huge land bank - at very low cost and mostly via private deals rather than at auction.
"Therefore, this may take more time for them to regain investor confidence," Lau said.
According to Thomson Reuters data, Evergrande has outstanding bonds of around $2.8 billion. In a May 31 report, ratings agency S&P said the main risk facing Evergrande was its "very aggressive debt-funded growth appetite."
"Generally, when a company grows too quickly, you should be very careful," said Howard Wang, Greater China head at JP Morgan Asset Management, which has $1.3 trillion under management globally. "There may be a problematic loan somewhere, or some connections to a local official and these are risks you have to consider."
Jefferies analysts had on Wednesday reaffirmed their bullish view on Evergrande after a management update, noting the company should have no problem meeting its 80 billion yuan annual sales target this year. As of Wednesday, 20 of the 24 analysts covering Evergrande recommended the stock a 'buy' or 'strong buy', according to Thomson Reuters data.
Deutsche Bank said in a note that Citron's concerns that Evergrande was insolvent were "not valid". Analysts Jason Ching and Tony Tsang noted there was "nothing new in the report that we were not aware of previously."
ISOLATED CASE
Investors appeared to treat Citron's research on Evergrande as an isolated case, as shares of Shenzhen-listed China Vanke <000002.SZ> closed flat.
Like Evergrande, many of China's largest developers list in Hong Kong to tap overseas capital. Property stocks in Hong Kong fell on the Citron report, with the Hang Seng property and construction stock index <.HSCIPC> closing down 2.1 percent. Evergrande was the top major decliner in Hong Kong, where the benchmark Hang Seng index <.HSI> ended down 1.3 percent.
One China-focused hedge fund manager, who did not want to be identified because of the sensitivity of the allegations, met twice with Evergrande, but did not invest in it.
"Evergrande is aggressive (in its accounting), more aggressive than the other players out there," the manager said. "But I don't believe it's a fraud." ($1 = 6.3599 Chinese yuan)
(Reporting by Alex Frew McMillan, Joy Leung, Vikram Subhedar, Nishant Kumar and Kelvin Soh; editing by Denny Thomas and Ian Geoghegan)
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