June 22, 2011 / 9:15 PM / in 6 years

UPDATE 1-Sino-Forest shares rise as speculators jump in

* Short-covering, speculative buying boost Sino stock

* Sino shares end the day up 50 pct on the TSX (Adds investor comment, updates share price move)

TORONTO, June 22 (Reuters) - Shares of embattled Chinese forestry company Sino-Forest TRE.TO jumped 50 percent on Wednesday as speculative investors jumped back into the stock after a sharp sell-off earlier in the week.

Shares of the Toronto-listed company have plunged more than 84 percent this month, following accusations of fraud leveled by Hong Kong-based short-seller Carson Block and his firm Muddy Waters.

The stock touched a eight-year low on Tuesday, after reports emerged that Sino-Forest’s largest shareholder, billionaire hedge fund manager John Paulson, had dumped his entire 14.1 percent stake in the company.

“In the absence of any new information you would have to attribute this to short-covering more than anything else,” said Elvis Picardo, a strategist and vice-president of research at Global Securities in Vancouver. “The whole situation with Chinese companies listed on North American exchanges continues to be a very fluid situation.”

Data Explorers, a provider of securities financing data, noted that short-sellers could be facing pressure from institutional investors, who had put their Sino holdings into lending programs, but now want to reduce their holdings.

Sino-Forest was the most actively traded stock on the Toronto Stock Exchange by volume once again on Wednesday.

With Paulson having sold his stake, selling pressure in the market has eased, said Gavin Graham, president of Graham Investment Strategy in Toronto.

“The stock has rebounded a little simply because of the absence of a big shareholder letting go of their position,” he said.

Shares of Sino, which have shed roughly C$4 billion ($4.12 billion) in market value this month, closed at C$3 on the Toronto Stock Exchange.

$1=$0.97 Canadian Reporting by Euan Rocha; editing by Peter Galloway

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