Taken from this blog :http://singaporemind.blogspot.com
A few years ago I received an SMS from my sis who was attending the AGM of a listed Chinese company (commonly known as S-shares the Chinese companies listed in Hong Kong are known as H-shares). The message from my sis was "Sell everything....". Alarmed by the message, I called my sis up immediately, she told me the CEO has been acting strange throughout the meeting and was evasive when questioned. The stock had more than quadrupled from the price I bought them but fell by 40% from the peak. With plenty of rumours going around, I decided it was time to let go and proceeded to sell the stock. I sold most of it over the next few days and I was down to my last 23 lots....it was a Friday and I had arranged to meet a friend at the PC Show, I decided to sell the remaining shares on the following Monday. It was a bad mistake. That Friday, the company announced that the CEO had cooked the books. The company, China Aviation Oil[Link], lost something like $800M on oil trading and had manipulated the numbers to show a profit. The CEO, Chen Jiulin was jailed for 5 years [Link]. As this company was linked to the Chinese govt and had been granted a monopoly to supply jet fuel in China, it was not allowed to fail...they had to fix it and stock holders eventually got 1 lot for 5 lots they were holding. The China Aviation Oil scandal occurred in 2005. I learned an important lesson about these S-chips - you can make plenty of money on the upside, but when the time comes to get out you have to hop off quickly. The recent scandals we are seeing surrounding S-chips are far worse - some of the companies have been found to be cooking their books before they were even listed. There were cases of fake cash[Link], fake receivables, cases of companies that suddenly faced massive losses after they were listed. There were a few cases of major shareholders who pledge their stake as collateral for loans and when the stock fell, the lenders dumped the stock to repay these loans causing the stock to spiral down rapidly. With so many of these s-chips suspended or on the verge of bankruptcy, it is starting to stink as badly as CLOB for Singapore investors left holding the bag.
Why are so many of these Chinese companies listed here in the first place? Most Chinese companies prefer to be listed in China, Hong Kong or New York and they choose Singapore only when they cannot meet the stricter listing standards of these countries. If these companies are not so good, why are they wanted here? The reason is there is plenty of profits to made by the underwriters, brokerages, SGX and IPO managers. The SGX and brokerages being prime beneficiaries of the high trading volume for these stocks. The boom in s-chip listings created a pair of new remisier kings [Link]who made hundreds of millions handling the IPOs. I leave you to correlate the millions they made, the IPOs they handled. the performance of these IPOs and the outcome for investors who put their hard earned savings into these IPOs. The onus to regulate and establish listing standards falls on SGX and there is very clear conflict of interest here because SGX has to take care of its own bottomline, the interests of its member firms (brokerages) and the investing public. This sorry saga is very similar to what happened during the dot.com bubble when many dubious companies (now known as dot.con companies) went for listing on Nasdaq. When the these companies fail en masse, the US SEC went after everyone from the CEOs to analysts to find out how they were responsible for that sorrry saga. The lesson learnt was that when there was money to be made and people think can get away without taking responsibility, bad things will happen - analysts hyped stocks the knew were bad because their firms stand to gain financially from business relationships with these companies.
.
"If they allow a small percentage of these companies to defraud investors, that's going to spoil the reputation of other Chinese companies, good companies, listed in Singapore. If we tighten (regulations) too much, we can lose some of these companies from being listed every year" - MAS Chairman, SM Goh Chok Tong, Friday March 27 [Link]
.
"Sir, if we don't tighten our people as a whole will lose even more in the future....and the small % is not small it is closer to 30-60%" - Lucky Tan
.
Where is MAS in all this? After this whole mess broke out, SM Goh who is the chairman of MAS asked the Chinese authorities to help to regulate their companies that list in Singapore[Link]. Why would the Chinese authorities do that when it is the MAS/SGX that responsible for the listing regulation to bring these companies to Singapore?! The Chinese are smart enough to have tighter regulation and enforcement over their own companies.....it is Singapore that allowed these Chinese companies which incorporate in Bermuda, Caymens Island etc out of the reach of the authorities to list in Singapore. Now that things have gone wrong, SM Goh is saying the Chinese authorities should help us?...That is so ridiculous. I wonder at which point MAS will begin to blame its regulatory failure on investors themselves a.k.a "they go in with their eyes open", buyer beware etc.
How much to regulate is not too hard a question to answer. Successful and good regulation should result in overall long term gain for Singaporeans commensurate with the investment risk. Regulation has to take at least care of 2 things - that the accounts of the companies at IPO can be trusted with high level of certainty and that the company is setup in a way that wrongdoers can be presecuted when the need arises as a deterrent. In this sorry saga money was made by a few local business entities but these crooked Chinese firms made off with plenty of money from Singaporean investors who had no realistic chance of long term returns. The current regulation can't be right unless the goal of MAS/SGX is to help IPO managers and brokerages make money without any regard for the investing public - the ordinary Singaporeans who trust our govt to do the right thing.
A few years ago I received an SMS from my sis who was attending the AGM of a listed Chinese company (commonly known as S-shares the Chinese companies listed in Hong Kong are known as H-shares). The message from my sis was "Sell everything....". Alarmed by the message, I called my sis up immediately, she told me the CEO has been acting strange throughout the meeting and was evasive when questioned. The stock had more than quadrupled from the price I bought them but fell by 40% from the peak. With plenty of rumours going around, I decided it was time to let go and proceeded to sell the stock. I sold most of it over the next few days and I was down to my last 23 lots....it was a Friday and I had arranged to meet a friend at the PC Show, I decided to sell the remaining shares on the following Monday. It was a bad mistake. That Friday, the company announced that the CEO had cooked the books. The company, China Aviation Oil[Link], lost something like $800M on oil trading and had manipulated the numbers to show a profit. The CEO, Chen Jiulin was jailed for 5 years [Link]. As this company was linked to the Chinese govt and had been granted a monopoly to supply jet fuel in China, it was not allowed to fail...they had to fix it and stock holders eventually got 1 lot for 5 lots they were holding. The China Aviation Oil scandal occurred in 2005. I learned an important lesson about these S-chips - you can make plenty of money on the upside, but when the time comes to get out you have to hop off quickly. The recent scandals we are seeing surrounding S-chips are far worse - some of the companies have been found to be cooking their books before they were even listed. There were cases of fake cash[Link], fake receivables, cases of companies that suddenly faced massive losses after they were listed. There were a few cases of major shareholders who pledge their stake as collateral for loans and when the stock fell, the lenders dumped the stock to repay these loans causing the stock to spiral down rapidly. With so many of these s-chips suspended or on the verge of bankruptcy, it is starting to stink as badly as CLOB for Singapore investors left holding the bag.
Why are so many of these Chinese companies listed here in the first place? Most Chinese companies prefer to be listed in China, Hong Kong or New York and they choose Singapore only when they cannot meet the stricter listing standards of these countries. If these companies are not so good, why are they wanted here? The reason is there is plenty of profits to made by the underwriters, brokerages, SGX and IPO managers. The SGX and brokerages being prime beneficiaries of the high trading volume for these stocks. The boom in s-chip listings created a pair of new remisier kings [Link]who made hundreds of millions handling the IPOs. I leave you to correlate the millions they made, the IPOs they handled. the performance of these IPOs and the outcome for investors who put their hard earned savings into these IPOs. The onus to regulate and establish listing standards falls on SGX and there is very clear conflict of interest here because SGX has to take care of its own bottomline, the interests of its member firms (brokerages) and the investing public. This sorry saga is very similar to what happened during the dot.com bubble when many dubious companies (now known as dot.con companies) went for listing on Nasdaq. When the these companies fail en masse, the US SEC went after everyone from the CEOs to analysts to find out how they were responsible for that sorrry saga. The lesson learnt was that when there was money to be made and people think can get away without taking responsibility, bad things will happen - analysts hyped stocks the knew were bad because their firms stand to gain financially from business relationships with these companies.
.
"If they allow a small percentage of these companies to defraud investors, that's going to spoil the reputation of other Chinese companies, good companies, listed in Singapore. If we tighten (regulations) too much, we can lose some of these companies from being listed every year" - MAS Chairman, SM Goh Chok Tong, Friday March 27 [Link]
.
"Sir, if we don't tighten our people as a whole will lose even more in the future....and the small % is not small it is closer to 30-60%" - Lucky Tan
.
Where is MAS in all this? After this whole mess broke out, SM Goh who is the chairman of MAS asked the Chinese authorities to help to regulate their companies that list in Singapore[Link]. Why would the Chinese authorities do that when it is the MAS/SGX that responsible for the listing regulation to bring these companies to Singapore?! The Chinese are smart enough to have tighter regulation and enforcement over their own companies.....it is Singapore that allowed these Chinese companies which incorporate in Bermuda, Caymens Island etc out of the reach of the authorities to list in Singapore. Now that things have gone wrong, SM Goh is saying the Chinese authorities should help us?...That is so ridiculous. I wonder at which point MAS will begin to blame its regulatory failure on investors themselves a.k.a "they go in with their eyes open", buyer beware etc.
How much to regulate is not too hard a question to answer. Successful and good regulation should result in overall long term gain for Singaporeans commensurate with the investment risk. Regulation has to take at least care of 2 things - that the accounts of the companies at IPO can be trusted with high level of certainty and that the company is setup in a way that wrongdoers can be presecuted when the need arises as a deterrent. In this sorry saga money was made by a few local business entities but these crooked Chinese firms made off with plenty of money from Singaporean investors who had no realistic chance of long term returns. The current regulation can't be right unless the goal of MAS/SGX is to help IPO managers and brokerages make money without any regard for the investing public - the ordinary Singaporeans who trust our govt to do the right thing.
