Understanding China, One Blog at a Time

An American in China

China’s Toxic Stocks- Buyers Beware

Posted by w_thames_the_d on August 1, 2011

I know nothing about stocks, but I live in China. After seeing how they live, act and absence of morals, one might think they are actually good at business, perhaps too good. That may be why so many Chinese stocks are in such a disarray this year.
I just read a great article called ‘Crouching Fraud, Hidden Problems’ About toxic Chinese stocks. Below I have highlighted some key points but you really should go to this link if you are considering buying a Chinese stock.
“Disclosure Insight looked at five year’s worth of SEC filings for 27 China-based companies listed here”
-A big “24 got negative ratings… Problems included SEC probes, accounting/auditor problems, fights with the boards or executive suites, and other investigative activity.
-more than a quarter of the 94 U.S. securities fraud lawsuits filed in the first half seeking class-action status were targeted at so-called Chinese reverse mergers
-and more than half, 56%, of the Chinese companies got its worst rating of being a “High Risk” investment. That compares with only 6% of non-Chinese companies rated “High Risk” by Disclosure, out of “a coverage library of 1,484 companies,” Gavin said in a statement.
-Disclosure Insight’s Gavin also says the analysis “shows a pattern of significant, chronic, and disproportional risk” from companies listing here from China, “spanning many industries, and included some of the larger and better‐known names.”
– “Since we first started producing D.I. Reports in 2009, our risk profiling discipline has consistently compelled us to assign negative ratings to the vast majority of Chinese companies that we have reviewed.”
continue here

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