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The Asian Snake Charmer and Stock Manipulation Scheme

 “Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | February 16, 2015
Bamboo Innovator Insight (Issue 70)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear Friends,The Asian Snake Charmer and Stock Manipulation SchemeOver the next two weeks, we will dance with the Asian Snake Charmers to learn the dark art of stock manipulation and its unsettling relationship with accounting fraud in the Asian capital jungles.The Asian Snake Charmer wields seductive power and influence with his or her pagi-like (“wind instrument”) manipulation methods in “painting the tape” to engender the “pump-and-dump” scheme. Through trade-based manipulation in “wash sales” and “matched orders” using nominee accounts and recycling short-term financing, we will see how Snake Charmers manipulate share price and share volume pattern to lure technical charting and momentum traders and investors to fall into the spell. Through information-based manipulation, we get to see how market participants, including sophisticated institutional investors, fall under the sway of the multiple false market catalysts, capital market events and corporate announcements released to the market. We will also learn about market making (e.g. artificially restricting the supply of IPO shares in the allocation process and creating significant aftermarket demand for the shares to create an artificial increase in the price of shares once aftermarket trading commenced), IPO/SEO laddering, the PRIN manipulation measure, order limit cancellation manipulation, working with underwriters to sell before lockup expiry, cashing out of shares by controlling owners to syndicates and pool operators at a discount, etc.

Vivid cases of Asian Snake Charmers include Harshad Mehta, Ketan Parekh, Tang Wan Xing (唐万新), Pin Chakkaphak and many more. The Asian Snake Charmer becomes one with the Asian Snake and is a manipulator of thoughts. In a timely fashion the evil one inserts thoughts into our minds hoping that we would adopt them for ourselves. If we can understand temptations and the Truth, we can break the spellbound enchantment.

Week 7-9

Week 1 – Survival in the Asian Capital Jungle: Who Knows What When? (108 slides)

Week 2 – Western Tools to Catch An Asian Snake? (111 slides)

Week 3 – The Incentivized Asian “Wedge” Snake to Tunnel Corporate Wealth (revised to 105 slides from 86 slides)

Week 4-5 – Shedding of the Asian Snake’s Skin, The Opportunistic Tunneling of Corporate Wealth (157 slides)

Week 6 – Descend into the Asian Snake’s Lair, Occult Offshore Centers, Tax-Tunneling, and Consolidation Craftiness (89 slides)

Week 7-9 – The Asian Snake Charmer and Stock Manipulation Scheme  (112 slides)

In the words of the late economic architect Dr. Goh Keng Swee, we desire to “explain, inform and educate” our abhorrence of stock manipulation schemes and potential accounting frauds in the Asian capital jungle.

We hope that the regulatory authorities in Asia will take a more serious and proactive (as opposed to reactive) approach to tackling stock manipulation and potential accounting frauds and restore trust in the capital markets. The large transfer of wealth from outsiders to insider manipulation significantly discourages how much and how many outside investors choose to invest in the market. The presence of manipulators impose large participation costs for genuine participants trying to either invest or raise capital in equity markets and explain why market reforms are hard to implement and emerging equity markets remain a fertile playground for the professional manipulators and insiders who have the incentive and power to manipulate prices, volumes, information and to inject “action” to lure investors and then offloading in a pump-and-dump scheme via related-party and accounting money-go-round transactions.

We need to make right the capital market phenomenon that the sagacious Peter Bernstein aptly described: “The ‘gulls amongst the public to feed the maws of professionals’ seem to replenish itself with remarkable regularity regardless of how many gulls drop out along the way.”

Happy Chinese New Year to everyone – we wish you Health and Happiness in the year of the Sheep!

PS1: We will resume on 2 March 2015.

PS2: We are in very preliminary and basic discussion with an established fund house with an illustrious hundred-year-old history and an Asian listed company about a potential collaborative effort to employ the Bamboo Innovator methodology to systematically identify and invest in neglected, misunderstood and underappreciated wide-moat resilient business models. Heavy lifting work is done in eliminating Asian companies with a higher likelihood of Asian-style accounting tunneling fraud via related-party transactions, misgovernance risks and the alluring value traps without a resilient and innovative business model. The portfolio investments in the top Asian Bamboo Innovators will be housed in the ETF-index and fund products with disciplined stock selection process and scalable fund capacity build-up. We sincerely hope that this potential long-term project can materialize for the investment community and public. We are grateful to have your kind patience and valuable support and we like to express our heartfelt thanks to you, our Subscribers to the Moat Report Asia. We assure you that we are thinking and working hard to continually add value and bring authenticity for you, our Moat Report Asia Subscribers.

Warm regards,

KB

The Moat Report Asia

www.moatreport.com

http://accountancy.smu.edu.sg/faculty/profile/108141/KEE-Koon-Boon

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

http://www.moatreport.com/members/

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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