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Strategies & Market Trends : Value Investing
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To: Jurgis Bekepuris who wrote (38007)5/24/2010 9:58:17 AM
From: Spekulatius  Read Replies (1) of 78476
 
re Chinese companies -
Barron's had a number where the "1/3 fraudulent" was referenced as well. I agree that this does not make it true.

I do think it's a little naive to assume that those irregularities that you are mentioning are all due to inexperience. I have not seen many pharma upstarts buying convention centers from related parties (AOB). Also for unsophisticated players they have set up nice legal structures (3 layers of holding companies, US, Cayman, Hongkong) that will make it very hard to enforce liabilities should any bad thing happen to shareholders. Then there are issues with double books ( a menace in China) where the Chinese tax books don't match the us books (according to shortsellers, we can't substantiate that because none of us understand the language enough or has the means to look into Chinese tax records.

I also mentioned the cement company (forgot the ticker) where the owner don't really own the shares, but a contract with the owners who are running the enterprise.

These are a lot of yellow and red flags for me. Your mileage may vary. I can tell you one thing - if there is a panic over the Chinese small cap fraud, you will be able to get a good and the bad ones at prices you never consider possible.
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