Malaysian-listed China firms losing lustre? “Investors just do not trust China stocks and they are quite justified in doing so”

Bursa-listed China firms losing lustre?

By Lidiana Rosli

Published: 2013/07/22

KUALA LUMPUR: China-based companies that are listed on Bursa Malaysia are having a tough time attracting investors and retaining their stock prices after being listed.

Almost all of the nine China-based companies, namely XingQuan International Sport Holdings, China Automobile Parts Holdings, HB Global Ltd, China Stationery Ltd, XiDeLang Holdings, K-Star Sports Ltd, China Ouhua Winery Ltd, Maxwell International Holdings and Multi Sports Holdings, are trading below their initial public offering (IPO) price as at July 19’s market close. An analyst told Business Times that low investor confidence and possibly “justified stigma” are the reasons for the lacklustre performance. “Frankly speaking, investors just do not trust China stocks and they are quite justified in doing so,” said the analyst, on condition of anonymity. 

“China stocks more often than not would open with really low premiums and then continue down south. There are also issues of what some would call ‘creative accounting’,” said the analyst, referring to a recent case involving HB Global.

In May this year, Bursa Malaysia directed HB Global to appoint a special auditor to probe into the company’s financials after its external auditors, Messrs Paul Wan & Co, reported wide discrepancies in the company’s unaudited results.

Now that another China-based company, bamboo flooring manufacturing Kanger International Bhd, will be listed as the 10th company with 80 million new shares in its IPO, would
things take a turn for the better?

“It is difficult to say, but I believe that as with most China companies, it will not be able to retain its price after the initial floating,” said the analyst.

The analyst also believes that China-based companies need to pay higher dividends to their stockholders and run a healthy balance sheet in order to retain investors’ confidence.

Meanwhile, XingQuan International, the first China company to be listed here in July 2009, closed at 95 sen last Friday, against its IPO price of RM1.71. The company has a net cash of RM358.62 million as of May this year.

China Stationery’s shares, which were listed in February last year, ended at 28 sen last Friday against its IPO price of 95 sen.

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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