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Jun 9

China is the New Dot.Com Hong Kong Security Chief Warns

Posted by Bill at 19:49 | News | Comments(2) | Reads(4844)
Martin Wheatley, who is the former head of the Hong Kong’s Securities and Futures Commission (SFC), recently stated that “China is the new dot.com of the investment world, and that the books of any individual company should be thoroughly examined before purchasing their stock.”

He went on to clarify his statement by saying “The world has been rushing into China without asking the normal questions they would do before investing in any firm.” This of course is very similar to the dot.com boom in the late 1990,s that later went bust, and left investors holding the bag.

china financial newsWheatley has been on the job since 2005, prior to that he spent 18 working at the London Stock Exchange. He believes that brokerage firms and investment banks based in Hong Kong which help bring Chinese companies public, must raise their standards when it comes to fully investigating a firms financial statements before listing their stocks.

For many years now there have been major concerns over the accuracy of the books of Chinese companies listed outside of the country, particularly on Wall Street. Presently, the US Securities and Exchange Commission are in the process of investigating many Chinese firms that are trading on US stock exchanges. In fact, a few of these companies have already had their shares suspended over allegations of accounting abnormalities and other improprieties.

The shares of a Hong Kong based firm that is listed in Toronto Canada, the Sino-Forest Corp fell recently after a short seller released a research paper detailing problems with their interpretations of accounting principles.  However, the company is disputing those allegations, and stated that their books are completely accurate.

Whether Wheatley’s warning will be enough to force potential investors into doing more research into Chinese companies before buying their stocks will only be determined by their actions in the future.

China has the largest uptapped investment potential of our times, however, unusual risk exists for overseas investors due to political or cultural reasons, protect your investment by subscribing China stock market news.

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