(27-08-2013, 07:01 PM)Wildreamz Wrote: [ -> ] (27-08-2013, 06:58 PM)minimax Wrote: [ -> ]last time I checked, PetroChina isn't an S-chip.
I know that; the similarity here is that both companies are from China, listing in a foreign company and recently IPOed, I suspect, jurisdiction in the case of fraud is equally challenging (damn, this should be the last red flag I need..).
I just want to learn the difference, hope you understand.
PetroChina was trading at low valuations back in 2002 because fund managers had dim views of China SOEs ----they were considered bloated and inefficient. Nobody was doubting that PetroChina was cooking its books or engaging in aggressive accounting stuff.
This is totally different from S-chips.
(27-08-2013, 07:13 PM)minimax Wrote: [ -> ]PetroChina was trading at low valuations back in 2002 because fund managers had dim views of China SOEs ----they were considered bloated and inefficient. Nobody was doubting that PetroChina was cooking its books or engaging in aggressive accounting stuff.
This is totally different from S-chips.
I think the key factor is that they are Chinese SOEs, hence accounting fraud is less of a worry, and any damages can always be paid back by the Chinese government. It is not a Market of Lemons, unlike S-Chips. There is no incentive for the Chinese government to con overseas investors, since damage to its image far outweigh any possible monetary gains.
Maybank Kim Eng Report
https://cced0bba-a-62cb3a1a-s-sites.goog...edirects=0
(27-08-2013, 07:24 PM)Wildreamz Wrote: [ -> ]I think the key factor is that they are Chinese SOEs, hence accounting fraud is less of a worry, and any damages can always be paid back by the Chinese government. It is not a Market of Lemons, unlike S-Chips. There is no incentive for the Chinese government to con overseas investors, since damage to its image far outweigh any possible monetary gains.
If you are expect that, you will be surprised. Chinese government does not pay the damage. at most, the government just recapitalize the company and wipe out all the minority shareholders. Similar to what US government did to save citi group. the minority shareholders were almost wiped out.
Well, on hindsight...
Short seller not alone in questioning China Minzhong Food
SINGAPORE — CIMB is ceasing coverage on China Minzhong Food after the Singapore-listed supplier of fresh and processed vegetables was accused of irregularities by United States-based short seller Glaucus Research, the Dow Jones news agency reported on Tuesday.
“We have been sharing Glaucus’ concerns for some time,” CIMB said in a note, particularly after the company issued new shares to Indonesian food conglomerate PT Indofood Sukses Makmur in February, and its failed bond sale in March.
“We found this intensive capital-raising worrying,” CIMB said, adding that “the company’s willingness to dilute [earnings per share] at such an unfavourable price suggests to us a desperate need for cash.”
CIMB last rated China Minzhong at Outperform.
http://www.todayonline.com/business/shor...zhong-food
(27-08-2013, 07:39 PM)freedom Wrote: [ -> ]If you are expect that, you will be surprised. Chinese government does not pay the damage. at most, the government just recapitalize the company and wipe out all the minority shareholders. Similar to what US government did to save citi group. the minority shareholders were almost wiped out.
Can explain how to "wipe out minority shareholders" by recapitalization? A takeover at a very low offer price?
and excerpts from Lim&Tan, it's hilarious.
1. We have gone through the 49 page detailed
report that GRG has put up detailing their
arguments why Minzhong is a “strong sell” and
find that their arguments carry some weight.
Although we will not be able to verify if their
SAIC (registered filings with the China authorities)
documents are accurate.
2. Admittedly, such detailed forensic research which
requires a lot of time and resources is beyond
the reach of local analysts like myself.
10. Given the numerous blow-ups of S-Chips (close
to 20) since 2006-2007 and that their key
management team not being able to be taken to
task in Singapore, unlike Singapore based fraud
cases such as ACCS and Citiraya where the
former’s CEO and CFO had to serve prison
sentence and the latter had to flee Singapore to
escape prison sentence, we believe the lack of
accountability by S-Chips management makes it a
very weak investment case for S-Chip investors
in Singapore, notwithstanding their attractive
growth prospects and valuations.
11. Even a former GIC-backed S-Chip like Minzhong
could fall 50% (on 24mln shares traded, above
their usual 5mln) in one morning just because of
a short seller’s report makes it meaningless for
us to continue covering S-Chips in general, hence
besides Minzhong, we are also ceasing coverage
on our other S-Chip coverage such as Sino
Grandness and Yamada, rendering our previous
HOLD recommendations on them irrelevant
henceforth.
(27-08-2013, 07:13 PM)minimax Wrote: [ -> ] (27-08-2013, 07:01 PM)Wildreamz Wrote: [ -> ] (27-08-2013, 06:58 PM)minimax Wrote: [ -> ]last time I checked, PetroChina isn't an S-chip.
I know that; the similarity here is that both companies are from China, listing in a foreign company and recently IPOed, I suspect, jurisdiction in the case of fraud is equally challenging (damn, this should be the last red flag I need..).
I just want to learn the difference, hope you understand.
PetroChina was trading at low valuations back in 2002 because fund managers had dim views of China SOEs ----they were considered bloated and inefficient. Nobody was doubting that PetroChina was cooking its books or engaging in aggressive accounting stuff.
This is totally different from S-chips.
China investigates more top PetroChina executives over corruption
Reuters - 58 minutes ago
http://www.reuters.com/article/2013/08/2...DE20130827 [Article]
I think a key difference between a private managed company and a SOE is that there is judicial recourse (ie a stick). But nonetheless, as investors of CAO would have learned years ago, there is truly no guarantee of anything in the stock market. Granted, the latter saw its CEO jailed and the Company remains listed today. I think SOEs would be a safer choice than private managed corporations if one truly wishes to be vested in a Chinese company - but again, buyers beware (truly applicable for any investment).
(Not Vested)
I'd just like to reiterate my stand that everyone should avoid S-chips. S-chips are the proverbial 7-foot hurdles that Warren Buffett says that one should avoid.
Go look for one-foot, 2-foot or 3-foot hurdles to cross over. Just avoid the 7-foot hurdles.
(27-08-2013, 07:45 PM)Wildreamz Wrote: [ -> ] (27-08-2013, 07:39 PM)freedom Wrote: [ -> ]If you are expect that, you will be surprised. Chinese government does not pay the damage. at most, the government just recapitalize the company and wipe out all the minority shareholders. Similar to what US government did to save citi group. the minority shareholders were almost wiped out.
Can explain how to "wipe out minority shareholders" by recapitalization? A takeover at a very low offer price?
since the company is damaged, unlikely it can borrow money to repay its liability; essentially, the company is bankrupted. so its equity is near to 0. The Chinese government can just come in and lend it some money and wipe the equity portion by swapping its lending to equity.
(27-08-2013, 07:54 PM)Nick Wrote: [ -> ]I think a key difference between a private managed company and a SOE is that there is judicial recourse (ie a stick). But nonetheless, as investors of CAO would have learned years ago, there is truly no guarantee of anything in the stock market. Granted, the latter saw its CEO jailed and the Company remains listed today. I think SOEs would be a safer choice than private managed corporations if one truly wishes to be vested in a Chinese company - but again, buyers beware (truly applicable for any investment).
(Not Vested)
I have exactly the opposite view. If you want to earn some money, SOEs are to be avoided. There are tons of uncertainty and cover-up within. The Chinese government in most of the time, does not give a damn about the equity. If the SOEs go bust, they just wipe all equity and recapitalize it. Just look at Cosco(not the Singapore listed one). It is SOE and its equity is questionable. If any more loss, it will be delisted with very low price. Its parent will recapitalize it and continue to run the shipping business. One day the shipping business recovers, it can be listed again.
@Nick
I hear you on that. The difference is the stick, and more checks (State-owned Assets Supervision and Administration Commission etc.).
But Chinese officials being the corrupt people they mostly are, makes investing in Chinese company a risky endeavour they usually are.