Wednesday, March 02, 2011

2 S-chips suspended for accounting irregularities...

I made a routine call my stock broker on Monday just to catch up on various events on the market. She told me she was busy in the morning handling distraught clients who lost money due to 2 S-chips getting suspended over the weekend for accounting irregularities. There is nothing unusual about S-chips going bankrupt overnight or their CEOs running off and cannot be found and so on. What rocked the market was it happened to 2 companies at the same time . For those of you not familiar with the stock market, S-chips are mainland Chinese companies listed in Singapore. I wrote about them a few times (S-Chips : From Red Hot Chips to Rotten Chips.... , Confession of an S-chip CEO. ). The 2 companies that were suspended were China Hongxing and Hongwei.

The authorities have not done much about the situation. 2 years ago when these companies started failing one by one, SM Goh made this remark:

"If they allow a small percentage of these companies to defraud investors, that's going to spoil the reputation of other Chinese companies, good companies, listed in Singapore. If we tighten (regulations) too much, we can lose some of these companies from being listed every year" - MAS Chairman, SM Goh Chok Tong, Friday March 27 [Link]

A few years back, many companies in China wanted to get listed in China. The Chinese authorities wanted to prioritise these listings by letting the bigger state oowned companies get listed first on the Shanghai and Hong Kong stock exchange i.e. the top quality companies got listed in Shanghai and Hong Kong. Smaller companies had to wait their turn. Singapore wanting a piece of the IPO action decided to entice these smaller companies to list in Singapore. The listing regulation was loosened up as what SM Goh said, if the regulations were tight, these companies wouldn't come here. So if you're the head of a Chinese company with dubious accounts where would you go? Singapore, Shanghai or Hong Kong? ..The answer is obvious but it is more obvious when you consider the fact that Singapore has no means to prosecute the wrong doers without the help of China. In a few cases, the CEOs have simply disappeared. I recall only one case of prosecution - that of Chen Jiulin for the accounting iregularities in China Aviation Oil(CAO). That case was a rare exception because a state owned enterprise was involved and the Chinese leaders probably didn't want to appear to be haboring fraudsters.

SM Goh spoke of a "small percentage" of companies defrauding investors. The number has since grown and we are no longer talking about a small %. From Wikipedia[S-chip Scandals]:

Fibrechem Technologies Limited (SGX: F12) (Bermuda)
FerroChina Ltd. (SGX: F33) (Bermuda)
China Printing & Dyeing Holding Limited (SGX: M67) (Singapore)
Zhongguo Jilong Limited (SGX: Z03)
Zhonghui Holdings Ltd. (SGX: Z04) (Singapore)
Sino-Environment Technology Group Ltd. (SGX: Y62) (Singapore)
China Hongxing Sports Limited (SGX: BR9) (Bermuda)
Oriental Century (SGX: 5II) (Singapore)
China EnerSave (SGX: 531) (Singapore)
China Sun Bio-Chem (SGX: C86) (Cayman Islands)
China Aviation Oil (SGX: C47) (Singapore)
China Fibretech Ltd. (SGX: F6D) (Bermuda)
Sino Techfibre (SGX: AD8) (Bermuda)

The number of Singaporeans hurt by S-chip fraud is not small. In a statement yesterday, SIAS reported that there were 14,000 shareholders[link], I believe mostly Singaporeans, with stakes in China Hongxing and Hongwei.

"Valuations have eased to a more attractive
level, following the recent market sell-down and with net
cash of some 20 Scts per share backing the stock, we
upgrade China Hongxing to a BUY, with a target price of
S$1, based on 20x FY09 earnings" - Analyst Report on China Hongxing[
Link]

Right now I know some of you may be thinking that the losses of these investors are part and parcel of stock investing so they only have themselves to blame. I suggest you think a little more about this. Didn't our regulators open the doors to allow this to happen? Our SGX is itself a profit-oriented company, various IPO managers and brokerage stand to gain in the form or fees and commissions benefited from this and ordinary Singaporean investors are the ones who lost their hard earned money in these companies. Is its right for govt to have a system so lax that foreign companies can defraud ordinary investors and do nothing about it as long as a select group of businesses benefit from the scheme of things?

Tens of thousands of Singaporeans have been hurt by these scandals. Yet the authorities have not done anything to prevent these scandals from happening again....no board of inquiry,, no investigation, no lessons learnt, no shouldering of responsibility for this mess. Some of you have a resigned acceptance of this "you die, your business" govt.....I don't and I'm angry they are doing nothing about this and so many Singaporeans have been and will be hurt by all this.

42 comments:

Anonymous said...

"no shouldering of responsibility for this mess."

Similarly, the authorities did not shoulder the responsibility for the mess of Minibonds, Pinnacle notes, High notes, Jubilee notes, …

Lye Khuen Way said...

I share your sense of injustice too. Ashamed that this once "fine country" is now a City-State with authorities ( Authorities/ Boards/Councils) who could not be bothered.

intellectual peasant said...

Lucky, I appreciate your thinking.

But how many do?

As an investor myself, I have steered clear of S(hit) Chips after several AGMs where the CEO seemed suspiciously unable to answer questions properly whether asked in Mandarin or English; or where the 'independent director' (always an ex-civil servant) seemed only interested in the fat salaries he got.

But as far as I can understand, the Ah Sohs and Ah Peks could not care less about company management. They are only interested in the food at every AGM.

I ask all Singaporean shareholders, honestly. How many AGMs have you attended? The people asking questions are often the younger Chinese or older angmoh/ Indian shareholders. Elderly Chinese, esp. in the Singapore GLCs and Blue Chips, go only to AGMs to Tak Pao Chiak.

Compare that to our elections and you understand what I mean. The average Chinese-educated over-50 voter is only interested in PAP's hongbaos every election. They couldn't care less about accountability or responsibility to the voters/shareholders in the business/country.

As the saying from Benjamin Franklin goes, those who will sacrifice liberty for security deserve neither.

Singaporean voters always listen to PAP's fearmongering and are afraid to vote for change. So change they WILL NOT get.

ghost of Hon Sui Sen said...

Lucky,
when we have buggers in govt who believe money is the way to solve problems, then it is reasonable to suspect they will do anything for money.

ps: just think of the possible accounting irregularities in GIC, Temasek, HDB, CPF, etc.

DareToAct said...

Again its the same old thing --- "for the greater good of the country and the society (meaning GDP growth), there will be some who have to sacrifice". Importing foreign and fallen talents (2003 onwards), casinos (2006), medical tourism (2006) mini bonds (2007), unit trusts (2000), asset enhancements (1993). Sorry, i might not get the years correct but you get the gist.

sgcynic said...

Further evidence that Singapore is indeed a city ruled BY law, and a playground for the rich...

Anonymous said...

i think people might already know this, but the manner with which SGX operates now, borders on ridicule. the officers go to pretty much every corner in china, enticing companies there directly to list in singapore. i am not sure how much due diligence takes place, but most of these officers are not exactly auditors extraordinaires. most of them are actually sales folks. its really insane frankly.

Anonymous said...

After a long string of S-chip fiascos, you would think everyone would steer clear of them, but no, in Sillypore, Sillyporeans continue to park their hard earned money on these fly by night fraudos and consters!

I've given up blaming PAP, we already know they only serve their own interests (SGX $$$). Its these people who buy S-chip stocks that have themselves to blame.

Anonymous said...

Why should the govt be bothered when they have vested interest in the investment. The more money throw into Singapore, the merrier they become as they peak their bonus , perk according to GDP. Hence they could not bother with investigation which may alarm china company from throwing and scamming money here. It is conflict of interest, but it is not new. In Singapore, conflict of interest and corruption in public govt bodies is normal not exception. Isn't some pap idiots have 8 months bonus ?

Clear eyed said...

As long as $$$$$ flow into their pockets and they and their cronies are not affected, the leeches go on enjoying their million $ lifestyle without caring a hoot whether and how many peasants suffer financial ruin. They can sleep very well every night on their million $ beds and their dreams, far from being nightmares, are sweet and scented with the smell of $$$$.

Anonymous said...

That's why I never buy S-chips, or put money in Minibonds, structured deposits and what not.

So all these years I don't have worries and also no need to blame anybody.

Because you cannot control external events like S-chips in stock market, politics, economics etc.

But you can control yourself by being wise and not be greedy for slightly better gains. Or live beyond your means.

I believe 66% of Singaporeans are like me. Or like Lucky Tan, who has lots of money because they are very wise with their money.

rookielim said...

Lucky,

I was just in Shanghai and coincidentally, my partners in Shanghai informed me that Singapore is known for actively courting Chinese company to list in SGX. SGX is desperate because they like to compare themselves with HSI. While HSI gets all the quality Chinese majors, we are scraping the bottom to find companies that cannot make it on HSI. The more companies that list in SGX, the more money SGX makes. They don't care about the quality of these companies. Obviously, the investors suffers.

PAP has lost their ways. They have always aimed for the wrong "results" such as growing GDP, SGX and other GLC's profits instead of aiming at the correct targets i.e., improving people's welfare and income. They up their own salaries and bonuses, when the majority of Singaporeans are still stuck with low pay with no idea how to deal with inflation that they have created.

Now that the election is coming, then they start talking about setting income growth targets for the people (which I think is not link to their pay and they can simply ignore it after the election). Do they seriously think that they can get away with this in the upcoming election????

Anonymous said...

Seems like we are a dumping ground for lousy people (foreigners) and companies. What's next?

Anonymous said...

We, Singaporean Cantonese always feels that the Chinese educated ones here will never match up to those HongKongers & it has been proven true in many ways and many times. That's why we always stick to watching TVB Cantonese Dramas on DVDs instead of watching local dramas.

Anonymous said...

"Do they seriously think that they can get away with this in the upcoming election????"
Anon 3/3/11 10:56

Why not, if the majority (66%) still support them. The majority are quite well off, contrary to what you think. Plus lots of new citizens who are also their supporters.

And better still if the opposition again give them 50% walkovers. Which is likely because I still see the opposition as weak as before.

Anonymous said...

"I believe 66% of Singaporeans are like me."

I believe most of them are suckers.

Anonymous said...

14,000 investors got burnt?

That is indeed a drop in the ocean.
Why did they buy these shares anyway?
Its all about making a quick buck.
So, they gambled and lost.

Would we be talking here had they gained 100% or 500% profit? I suppose not.

The fight for liberty and freedom of choice is only lip service. So, the freedom to buy S chips, the freedom to have all the world stocks listed here.. freedom requires discipline..

Anonymous said...

Buying S-Chips is like gambling in Casinos. The chances of winning are very slim.

Anonymous said...

"That's why I never buy S-chips, or put money in Minibonds, structured deposits and what not."


Most investors are aware that they should avoid invest in complex financial products.

But the problem is that many high risk complex financial products are marketed as low risk simple products. For example, minibond products were advertised as a low risk bond from the six leading banks with the return about the same as local banks’ preference share.

Most investors not aware that these are complex products because the newspaper advertisements, sales brochures and prospectus are drafted by a group of “talents” (financial and legal experts) so that it appears similar to those low risk simple products.

Anonymous said...

"Most investors not aware that these are complex products because the newspaper advertisements, sales brochures and prospectus are drafted by a group of “talents” (financial and legal experts) so that it appears similar to those low risk simple products."
Anon 3/3/11 18:07

They did not say low risk lah, at least not in black and white. However they did say there is a risk that you may lose part or all of your principal.

Whenever I see such a clause in a financial product, I avoid it straightaway.

As for stocks, I only go for blue chips, buy directly from the market and only when in prolonged downtrend. Definitely not now.

Anonymous said...

"They did not say low risk lah, at least not in black and white. However they did say there is a risk that you may lose part or all of your principal."

For minibond, many investors understand that the principal amount is not guaranteed. But they were misled by the newspaper advertisements and sales brochures into believing that they will lose only 1/6 of the principal amount if one of the six banks went bankrupt and they will lose the entire principal amount only when all the six banks failed.
(1)Investors bought the product which advertised prominently in the newspaper like a long term (5-years) bonds issued by the six leading banks.
(2)Investors bought the products from the well regulated and well respected (at that time) institutions.
(3)The interest rate of 5.1% offered is similar to many low risk long term financial products.
(4)Because of the reputation of the six leading banks, Investors willingly park their hard earn (20+ years saving) money for 5 years just to earn a yearly return of 5.1%.

Do you consider bonds from the six leading banks (as adverstised in the newpapaers)are NOT low risk products?

Anonymous said...

"They did not say low risk lah, at least not in black and white. However they did say there is a risk that you may lose part or all of your principal.

Whenever I see such a clause in a financial product, I avoid it straightaway.

As for stocks, I only go for blue chips, buy directly from the market and only when in prolonged downtrend. Definitely not now."

Are you aware that you may lose part or all of your investment amount even you only go for blue chips?

Anonymous said...

"They did not say low risk lah, at least not in black and white. However they did say there is a risk that you may lose part or all of your principal.

Whenever I see such a clause in a financial product, I avoid it straightaway."

Anon 3/3/11 21:39

The clause "you may lose part or all of your principal" should not cause any alarm to the investors because this is the standard clause appear in most of the low risk financial prodcuts.
(eg local banks (DBS, UOB, OCBC) preference shares, blue chips' bonds)

Anonymous said...

"The clause "you may lose part or all of your principal" should not cause any alarm to the investors because this is the standard clause appear in most of the low risk financial prodcuts.
(eg local banks (DBS, UOB, OCBC) preference shares, blue chips' bonds)"

PAP will always use ridiculous and irresponsible clause just to get away with it. It is nothing new that they use law and despicable clause to cover their own backside.
Don't believe ? Just read this nonsense of PAP clowns
http://theonlinecitizen.com/2009/07/how-can-fund-become-insolvent-and-thus-stop-payouts/

Anonymous said...

And now SGX is proposing to buy the Australian Stock Exchange for $8 billion.

I hope the Australian Govt is cleverer and does not allow this deal to go through.

I can just picture the SGX's lower listing standards diluting the listing rules of the Australian Stock Exchange.

Anonymous said...

To Anon 23.42, 00.31,

What is the risk of UOB, DBS, SIA or OCBC going bust?

Or the Sing dollar become worthless?

Or the whole of Singapore in earthquake like the one in Christchurch? Or attacked by nuclear weapons?

Come on.

Anonymous said...

Therefore the clause "you may lose part or all of your principal" should not cause any alarm to the investors.

Come on.

Anonymous said...

Come on, any country and for that matter any being can suffer from unexpected calamity, natural or otherwise.

Anyone can guarantee the political stability of Sin? The fall of a pillar can bring down a whole building.

Anonymous said...

The more deplorable the situation is now, the more chances we have for a real change. So, stop comparing ourselves to what other govts. are doing in their country and decide our own future with our votes. Let's hope the opposition can really gear up and contest in most GRCs so more people can vote. Likely, we cannot vote out the PAP, but we need them to know that most born and breed Singaporeans are very unhappy with their situations.

Anonymous said...

GohCT is a dreamer and a good for nothing seat-warmer for LHL.

Anonymous said...

""新加坡人收入媲美先进国04/03/11 来源:星洲日报 http://www.sinchew.com.my ""

Quite angry at such news!!

Some people are having a very very good time while many older people / PMETs have no jobs, no income.

They may be even worse-off than many old people in places like Malaysia.

Using median salary sometimnes can be very misleading!!

Anonymous said...

out of 10 person i talked to. 9 will vote of opposition.... as long as u give us a decent candidates.... no worries..

The Pariah said...

Essentially, we do NOT have an independent securities regulator.

SGX kinda plays a bit of that role EXCEPT that they are more commercially driven towards profits as a listed company.

Natural conflict of interest between Profit and Compliance.

MAS kinda plays the other bit of that role EXCEPT that they look at the Big Picture with such a Wide Angle Lens that any rot would look too fuzzy and fudgy to be detected from Way Up There.


That's First World Governance for you, my fellow Singaporeans.

That was why you voted for PAP all these years, remember?

Anonymous said...

In his walk-about rounds recently, PM Lee in his reference to the dramas from Opposition Parties said "he looks forward to the next instalment".
I suppose that is a freudian slip. He is looking forward to recouping his next 4 years of instalment payment from the citizens once they fall for his million dollars facelifts, healthcare boost and other who-know-what chips.

Personally, I am looking forward to have my chilli crab, kway teow and hor fan with the dividends payout. After the meals, I will walk leisurely over to the polling booth to cross an "X" on a place where lightning will not strike me. Once bitten, twice strikes, third time sway leh..

Anonymous said...

"""二百多天沒有政府的日子,政府部門依然辦公,警察依然執勤,一切照舊,大家過平常日子。期間,比利時的經濟成長還超越歐洲平均值,失業人口也低過歐洲平均。破了無政府的世界紀錄,一些比利時人開街頭派對慶祝,這是他們開創的世界第一""

This is the advantage of being a "democratic society".

Anonymous said...

Do u know/undertstand the problems of "structure notes"??

Take Pinnacle series 5 for example, at one time it was only 0.1 % of the original value. Later it increase to 20% then 30 % then suddenly bcome over 90% of the principal value.

Because its pricing is totally not "transparent" and can only be traded "over-the counter", they can just fix the prices at their discretion.

If not because some US lawyers willing to help the spore investors to fight in a "Class-action", the local investors (victims) may not be so lucky. The US lawyers agreed to get paid only when they win the case (e.g to received certain % of the money recovered if they win the case.)

So it is better to have someones to help the oridnary people and represent their interests.

Anonymous said...

the same goes for property investment. just read the nonsense in the newspaper. very soon, many will be burnt.

Anonymous said...

"the same goes for property investment. just read the nonsense in the newspaper. very soon, many will be burnt."
Anon 11:54

No lah, property is an exception. Because govt owns and control the sale of land and also set the base price for housing, that is HDB.

Unless a lot of local peasants want to emigrate and also foreign "talents" don't want to come here any more.

Or the opposition wins 98% of the seats in the coming election.

Possible or not? You say lah.

Anonymous said...

In Singapore, not only one must read the fine(almost impossible to read for those with the slightest vision impaired).
The BOLD PRINT THAT STATES CLAUSES AND CONDITIONS ARE SUBJECT TO CHANGE WITHOUT NOTICE, put consumers to the highest risk and disadvantage.
How the hell such clause and condition are allowed to stand is absolutely ridiculous.

patriot

Anonymous said...

"How the hell such clause and condition are allowed to stand is absolutely ridiculous.

patriot"

Because nobody has or dare to challenge it yet in court, so it still stands lah.

Or has anybody challenged it? If so, please post it here on the outcome.

Anonymous said...

Most financial products (whether low risk or high risk) offered with the standard clause “there is a risk that you may lose part or all of your principal.”

It is ridiculous to suggest that we should avoid all financial products with such a clause.

Anonymous said...

Hi, anyone knows if I can get back my money (be it partial) if a stock was suspended? Please advise.