China’s NDRC Probes Old Veteran Jewellery Stores in Shanghai; Lao Fengxiang may have to uncouple some 250 million- 2.5 billion yuan from its profits for fines

China’s NDRC Probes Old Veteran Jewellery Stores in Shanghai

07-23 16:19 Caijing

Lao Fengxiang may have to uncouple some 250 million- 2.5 billion yuan from its profits for fines.

Following a sweep on baby formula makers and parametrical giants, the powerful National Development and Reform Commission accused gold jewellery association, Lao Fengxiang (600612.SH) and other famous jeweler stores in Shanghai of fixing prices in the latest antitrust probe. The companies under investigation could face a large sum of fine, if proves to be true, analysts say, at risk of eroding profits that have accumulated in years. Companies fixing prices in the market can be delivered a penalty equivalent to 1 percent of one year sales at the least, and 10 percent of one year sales at the most, under Chinese laws.Authorizes remain undecided in whether the Shanghai association and the jewelers are corning the market and fixing prices of jewellery, but there is evidence that Lao Fengxiang and its rivals have reached monopoly agreements, which is against the country’s laws.

Jewellery stores including Lao Fengxiang and Yuyuan have already confessed to antitrust organs about their wrongdoings, the Economic Observers reported, saying “the companies have colluded with each other to fix prices, damaging consumers’ interests.”

Lao Fengxiang recorded a sale of roughly 25 billion yuan in 2012, which means the company may have to uncouple some 250 million- 2.5 billion yuan for fines.

The company posted some 391 million yuan in net profit in the first half, compared with a full-year profit of 611 million in 2012.

Shares of Lao Fegnxiang slumped 3.47 percent with an intra-day tumble of over 5 percent. Shanghai Yuyuan Tourist Mart (600655) fell 1.79 percent on Monday.

Earlier this year, local high-brand liquid Moutai and Wuliangye Yibin were fined by the NDRC 247 million yuan and 202 million yuan, respectively, for fixing 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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