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China Gaoxian’s accounting irregularities: Why isn’t SGX tightening up listing rules?

China Gaoxian turn out to be the third company listed on the SGX after China Hong Xing and Hongwei to be investigated for accounting irregularities.

I hope non of my friends and readers out there were suck into this.

Disclosure: I was vested in Hongwei in the past.

The amazing thing is: China Gaoxian managed to raise $223.8m (net proceeds) in new capital via a KDR issue (30m KDRs; or 600m new shares) in January 2011!

Right now the situation is that

  1. China firms seem to think that listing in Hong Kong is a difficult proposition. The rules are more stringent.
  2. If they want to con money the best place seems to be SGX.
  3. SGX have a reputation of having lax rules because they want to increase the number of listings and a reputation of a leading exchange.
  4. After they list in Singapore, they use this reputation and credentials to get it listed on another exchange to get even more money!
  5. On top of this MAS in singapore will not do much because they will always say INVESTMENT HAS ITS RISKS, you as the investor should take care of your own problem!

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Thursday 31st of March 2011

people respond to incentives. SGX's incentive is to maximise value to it's shareholders. It also wants to increase it's visibility as a global stock market. Hence, it allows dubious China companies to list here.

IMO, SGX is walking a thin line between regulating these PRC "businessmen" and it's role in maximising shareholder value.

It's abit akin to SMRT/SBS/ComfortDelgro wanting to raise fares to maximise shareholder value as opposed to the good of the nation. Public Transport Council was set up to regulate them.

Maybe we should have something like that for SGX?

Meanwhile, I am staying WELL clear of S-chips. Won't touch them even with a radiation suit and a 20 foot pole!


Sunday 27th of March 2011

Good point, thanks.

But I somehow find that I have more than enough on my plate already just trying to analyze the local companies, without having to even think about China ones! Or maybe I just don't have enough time..... :P


Saturday 26th of March 2011

Hi, I think most of us know from day one, investing in China companies in SGX is very risky. Yet most of us let our guard down after "getting familiar with them". I have told this to my wife and friends/relatives more than one time. Yet i invested in some of them. This is where and when I think "Temperament is more important than high IQ". Is MAS or SGX to blame? Maybe? But then don't you think if it is to a certain extent, then investing will be so much easier for all of us. Ha! Ha!


Saturday 26th of March 2011

Hi Drizzt, I can't agree more with you. As long as the "Papaya" has nothing to gain, it's caveat emptor. Papaya always say, "GOV. do not interfere with private personal's matter". And Singapore is run, base on meritocracy. So you look after your own interests. And not until your own interest becomes common interests, then the "Papaya" has no choice but to step in. That has been the main policy of this country since day one. It's always at the expense of the common people to bear first before anything is done for the common good. i hope i am wrong in the long run.


Sunday 27th of March 2011

hi Temperament, we are after all humans. i say reits are sometimes chui but i still bite them here and there.

Sometimes can bite but must know what you are getting yourself into. If you think Aims AMP Industrial REIT or SABANA is high risk REITs compensating at good yields, but them low but watch them more closely.

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