Sahm Adrangi, the 30-year-old head of Kerrisdale, said the short selling was not based on a negative view of the Chinese economy.

'Instead, we found a set of companies listed in New York that had numbers we did not believe were true,' Adrangi said.

He declined to comment on the performance figures contained in the letter to investors, saying the data was confidential. However, he said Kerrisdale's top five bets each quarter 'were Chinese shorts'.

Adrangi started his fund with US$300,000 two year ago, he said.

He currently manages assets worth about US$20 million.

Bronte's Hempton would not reveal the value of funds under its management.

Since March, more than two dozen US-listed mainland companies had disclosed auditor resignations or accounting problems, the Securities and Exchange Commission said.

The disclosures were mostly sparked by research released by hedge funds such as Kerrisdale, which have gained from accusing mainland companies of fraud.

The accounting scandals and concerns about mainland inflation and bad loans in the banking system have soured global sentiment on Chinese firms.

In November, Kerrisdale accused Harbin-based China Education Alliance of being 'mostly a hoax'. China Education Alliance categorically denied the accusations but its shares have since fallen 79 per cent and it is fighting two investor lawsuits.

Kerrisdale claimed to have hired private investigators who found that China Education Alliance's website was not accepting payments and its main teaching centre lacked sufficient desks and teaching equipment.

While Hempton does not publicly disclose all his short selling trades, he said he was betting against Longtop Financial Technologies, a Xiamen-based IT outsourcing company, which is being delisted from the New York Stock Exchange.

Longtop, taken public by Goldman Sachs and Deutsche Bank, said in May that its auditor Deloitte resigned after discovering its financial statements were false.

Short sellers borrow stock they do not own, sell it and hope to profit by buying it back more cheaply in the future.

Detractors say short sellers such as Kerrisdale have made unfair gains by spreading negative research or rumours about young companies. Critics say these companies lack investor relations skills, the ability to defend themselves convincingly or present evidence to refute their accusers.

'There is potential for abuse,' Adrangi said. 'We steer clear of committing abuses by making sure what we write is entirely accurate. We focus on direct evidence, and hopefully we can stop little stock scams [from] growing into very large ones.'

Another short seller who would have done well in recent months is Carson Block, a 35-year-old former lawyer who runs research company Muddy Waters.

Toronto-listed timber company Sino-Forest Corp, perhaps the largest target for short sellers, has lost 54 per cent of its value, or more than US$2 billion since Block accused the mainland company of a massive fraud in early June.

While the Hong Kong market is no stranger to accounting scandals, hedge funds have mostly focused on short selling US-listed names because America's listing rules make it much easier for short sellers to gain profits.

Hong Kong-traded firms that are accused of or admit to accounting fraud generally have trading in their shares suspended for months, either by regulators or their management. This can make it impossible to profit from exposing dodgy dealings.

US-listed Chinese companies that are accused of fraud usually continue trading at depressed prices, allowing short sellers to cash in.

By contrast Hong Kong-listed China Forestry Holding, a logging firm that admitted in May that former chief executive Li Han Chun had cooked the company's books, has not traded since January.

$462m

The amount, in Canadian dollars, that hedge fund Paulson & Co lost after dumping its entire 12.5 per cent stake in timber firm Sino-Forest