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Don't take Muddy Waters lightly

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watch_out July 20, 2012 (Chinavestor) What does it to take down New Oriental Education (NYSE:EDU), the largest Chinese company from the education sector? Muddy Waters alleged New Oriental Education (NYSE:EDU) of cooking books. The stock tumbled over 30% this Tuesday and traded lower the following day, but recovered 18% yesterday as bargain hunters stepped in.

But investors should not take Muddy Waters lightly. The company took down Sino Forest, a large Chinese listing with market cap similar to that of New Oriental Education (NYSE:EDU) in Toronto. And that Chinese education companies are not prone to cooking books, investors have to remember what happened to China Education Alliance (NYSE:CEU) or ChinaCast Education (NASDAQ:CAAS) as late as last month.

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