Jon Carnes is about the last person on Earth you’d expect to turn bullish on China’s stock market. This is a man who built his career on wagers against Chinese companies, bets so successful that one analyst ranks the 41-year-old among the best short sellers worldwide -- more effective than industry giants from Carson Block to David Einhorn. Carnes’s bearish research caused such a stir in 2011 that he fled China and had to fight off fraud allegations. The ordeal landed one of his colleagues in a Henan province prison. So when Carnes says he’s now an advocate of investment in China Inc. -- with a 111 percent rally forecast for the Shanghai Composite Index -- it’s worth paying attention. His optimism is all the more striking given it comes at a time when many international money managers are turning bearish, put off by what they see as bubbly valuations and unjustified government intervention to prop up share prices after a $4 trillion rout. For Carnes, the bull case is simple. The stock market’s surge to a seven-year high in June caught most Chinese investors by surprise, and they’re determined not to miss the next buying opportunity. In a country where household wealth surged to an estimated $21 trillion last year, less than 10 percent of the population is invested in equities. “A lot of people missed out on the bull market,� Carnes said by phone from his office in Vancouver. “This violent correction is a huge buying opportunity for them.� Alfred Little Carnes, who started his investment career in 1992 with $3,000 of savings from a part-time job at a South Carolina fried chicken joint, has been researching Chinese shares for at least a decade. Around 2009, he started focusing on short-sale opportunities in companies he suspected were inflating their financial statements. To shield against authorities who frowned on negative publicity for Chinese firms, Carnes created a fake online identity -- Alfred Little -- that he used to broadcast his views. It was a winning strategy. His record of public bets ranked first among more than 28 short sellers last year tracked by Activist Shorts, a website that analyzes bearish research. At least eight Chinese companies he targeted have since de-listed or been charged with fraud. Prison Time Carnes also made enemies along the way. After one Alfred Little report in 2011, targeting a Toronto-listed miner of silver in China, he got threats of violence and decided to leave the country. Mainland authorities charged his Chinese-born colleague, Kun Huang, with defamation and Huang served two years in prison. Carnes’s use of the fabricated Alfred Little identity led to fraud allegations by Canadian securities regulators, which got dismissed in May.

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