All Malaysian-listed China firms end in the red after listing

Most Bursa-listed China firms end in the red

LIM CIAN YAI

Published: 2013/05/09

KUALA LUMPUR: China-based companies listed on Bursa Malaysia mostly ended the trading day in the red yesterday, following HB Global Ltd’s investor alert announcement on Tuesday.

This is the first time a China company listed here has reported to the stock exchange a wide discrepancy between its unaudited results and that prepared by its external auditors. Bursa Malaysia leapt into action yesterday, directing HB Global to appoint a special auditor to probe the company’s affairs, particularly its financials, and identify any irregularities.

pix_bottomHB Global has two trading days from the date the directive was issued to appoint the special auditor.
The stock exchange also insisted that the special auditor be independent and from a reputable internationally affiliated accounting firm.

On the trading floor, China Stationery Ltd (CSL), the largest China company listed here, suffered the brunt of selling pressure, falling by as much as 6.5 per cent to close the trading day at 28.5 sen, giving the company a market cap of RM354 million.

CSL was the first China company to have a market capitalisation of more than RM1.2 billion on Bursa Malaysia, which was achieved in October last year.

“Malaysian investors are very cautious in trading China stocks. This case (HB Global ) might deteriorate the situation further,” said Minority Shareholder Watchdog Group research and monitoring division senior Manager Ng Hoon Ho.

HB Global on Tuesday reported to Bursa Malaysia that its independent auditors were “unable to satisfactorily and independently substantiate the bank balance of the subsidiary company”.

“Included in the group’s balance sheet as at December 31 2012 was bank balance amounting to 249.63 million yuan. We were not able to receive reliable independent confirmations on majority of the trade receivables and payables that were circularised,” said its external auditors, Messrs Paul Wan & Co.

Ng told Business Times that when it comes to China companies listed here, some of banks in Mainland China do not respond to auditors’ queries on the financial standings of the companies.

Thus far, there are nine China companies listed on Bursa Malaysia, namely XingQuan International Sport Holdings, China Automobile Parts Holdings, XiDeLang Holdings, K-Star Sports Ltd, China Ouhua Winery Ltd, Maxwell International Holdings and Multi Sports Holdings.

Only China Automobile and XiDeLang made gains of 2.7 per cent yesterday to close trading at 38 sen and 19 sen, respectively. K-Star closed 2.38 per cent higher at 21.5 sen.

Ng said scandals involving China companies listed on Singapore’s stock exchange had spooked Malaysian investors, even before HB Global’s shortfalls were pointed out by the auditors.

On the local bourse, the common denominators for China firms are they have loads of cash in the bank, trade at single-digit price-earning ratios, and, except for K-Star, trade way below their initial public offer prices.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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