China Stocks – Inflating Revenues

Posted on January 21, 2012 by Editor

Inflating Revenues in China Stocks and How To Avoid The Fraud

Inflating revenues is another common way fraud is being committed in China Stocks.

The most simple way is to fake the receipt of revenues. The company has to show more money coming into the bank than really has.

China Stocks - How To Avoid Fraud In China Stocks

It’s a simple matter of getting a bunch of fraudulent invoices from the black market, and putting the revenues on your books.

From there, these fake revenues have to be reflected in your banks statements as well, so you need fraudulent bank statements.

This is a simple matter of creating the statements and presenting them to your examiner with the “Bank Chop” seal already stamped. Of course, you’ve obtained a fake stamp for about $200.

It’s common to claim receivables that don’t exist. You claim to have shipped a product, and the buyer is in on the conspiracy. When called by the examiner, the buyer confirms the purchase, but he has, of course, been bribed in advance to cooperate.

China stock fraud going on in the China livestock industry

There’s a lot of fraud going on in the China livestock industry where sales are double counted. For example, and pork producer might sell a whole generation of baby pigs to local farmers. They raise the pigs, and sell them back to the pork producer, who then sells them to an end buyer. The hogs were never really sold to the local farmer, and the sale of the livestock is double counted. Since this is the same animal, this is not allowed under GAAP accounting standards.

China Stocks Fraud And How To Avoid It

The Turning Point?

Posted on October 28, 2011 by Editor

As I have written, October has traditionally been the Bear Killer. 4 of 5 Bear Market die in October, and a baby bull is born.

I wonder if we’ll look back in a few months, and decide October 27, 2011 was the turning point. It’s the day the EU announced its first specific steps towards handling the European Banking and Sovereign debt crises. The EFSF is supposed to get $1.4 trillion to help the banks, and the banks are supposed to volutarily write the debt down by 50%. If it’s voluntary, there’s no default- but there must be 100% cooperation.

The cuffs are now coming off for the markets.

In other news, ECS recommended stock BIDU announced Q3 numbers, and profits only nearly doubled to 80% to almost $300 million. The stock was $104 two weeks ago, and is $146 today.

The Shanghai As were up 1.55%, and the Bs up 2.08%. That’s 5 days in a row of appreciation.

A baby bull might have been born yesterday. I certainly hope so.

9.1% is the number- that’s GDP growth in China in Q3

Posted on October 18, 2011 by Editor

9.1% is the number- that’s GDP growth in China in Q3. It’s the lowest in 2 years, but that certainly doesn’t seem too bad to me in light of all that’s going on around the globe. Chinese exports were hurt by the slow down in Europe, but retail sales within China grew about 17%- that’s impressive.

One would think the markets would respond positively to this news- not so. Many news services are reporting 9.1% was a disappointing number. However, that’s not why those markets were down. With inflation being the primary enemy of the Chinese economy, a little cooling off of GDP is not the worst thing in the world.

It was news out of Germany that dampened the world’s appetite for risk and equities. German Chancellor Angela Merkel’s chief spokesman said EU leaders won’t provide a quick ending to the debt crisis at an Oct 23 summit. Last week, the market had been optimistic the EU would begin to deal with this problem. The Germans killed the optimism, and down stocks went. It seems all global equities markets are being held hostage to the EU banking crisis.

The Shanghai A shares sold off rather harshly overnight- down 2.35%- the B shares identical at 2.35%- leaving China markets still very deeply in Bear Market territory- down about 20% on the year.

There has been rumors abounding suggesting the Chinese are ready to step in a help with an EU bailout. The rumors say they are just waiting for the enormity of the problem to be defined. This was reported in the UK’s Sunday Times.

We’ll see.

Chinese Markets Go 5 for 7 – Chinese Markets

Posted on October 6, 2011 by Editor

The Shanghai A shares were down .25%, and the B shares down .14%.

The price of copper, considered one of the leading indicators of industrial demand and the health of China’s manufacturing economy, fell to a 14 month low. Many believe this signals another global recession.

We’re going to need some economic numbers out of China suggesting the impending recession is not as bad as the market is pricing in, and the growing Chinese consumer can pick up any shortfall their export manufacturing might experience.

Here’s a few other news items out of China today:

Hedge fund manager and highly respected Bear and Short sell Jim Chanos estimates China’s debt to GDP ratio is close to 200%- worse than European countries. He says their debt crises will lead to 0% growth in 2012. He believe China will write of 7.5% to 10% of GDP to bad loans.
Resource investing news reports electric car demand is strong in Brazil, India, and China- price being the key sticking point.
In a move that many see as an “In Your Face” to the US Senate, China has frozen its currency at the current level. By a wide margin the US Senate recently passed a initiative to start crafting a bill that would allow the US to impose big tariffs on the imports of countries who do not allow their currencies to float. This is aimed directly at China. However, China observers point out- the last time China did this, it was three months out in front of a massive stimulus program.

That’s it for today. Perhaps better news tomorrow.

Another Train Wreck Wrecks China Markets Today

Posted on September 28, 2011 by Editor

The Shanghai A shares were off .95%, and the B shares off .17%. These indexes just continue bumping along the bottom at about the lows of 2010.

In Shanghai, 13 stations slowed their trains, and Line 10 closed. Special buses were brought in by the government to move people. Rail stocks of all sorts were clobbered in both Hong Kong and China trading.

In other China news:

Senior China officials were out yesterday stating China GDP growth would hit 9% this year. Lu Ahonguyan, deputy director for the State Economic research center, said there was no need to worry about a hard landing for the Chinese economy. Lu said the global slow down will help China contain rising prices and readjust the country’s economic structure.
Allan Liu, manager of the Fidelity Southeast Asia fund, revealed his favorite consumer stock picks for China. He is extremely bullish on Baidu (BIDU), and Sina Corp (SINA)- Bidu is the China equivalent of Google- Sina is a bit more like a functional Yahoo!. He also likes Hyundai Motors and Kia Motors. Fund manager Paul Winborne of JO Hambro Capital Management likes Sun Art Retail, China Mengui Dairy, Golden Eagle, Hengan Inernational, and Baidu.

That’s all for today.

Another Ugly Week is Likely for China Stocks

Posted on September 26, 2011 by Editor

China stocks were down again in Monday trading. The Shanghai A shares were off 1.66%, and the B shares off 2.52%. We are now approaching the summer lows of 2010, which was the beginning of a nice move to the upside in China stocks.

The sentiment is largely negative on the global outlook in China. The only bright spot I could find in any of the commentary on China is the possibility the Chinese policy makers might be able to stop raising interest and tightening lending requirements.

Morgan Stanley continues to invest in the Asia mega caps as they are finding the dividends attractive, and feel they are getting paid to hold those stocks. MS Asia forecasts the MSCI Taiwan index may rise 32% in the next two years based on earnings and dividends.

On the “Interesting” front, the first “Gold Vending Machine” in the world has been installed in Beijing. Shoppers in the popular Wangfuijing Street can put cash or a bank card in a vending machine to withdraw gold bars or coins.

Very interesting.

Wow: The Perfect Storm, And China Stocks Crushed

Posted on September 22, 2011 by Editor

What an ugly day. China stocks are being absolutely crushed today. The news out of China is a “worst case scenario”.

Today is likely to be capitulation day, and I would expect something better next week. September can be an ugly month, and its living up to its reputation.

In over news night there were two items out of China that have fund managers just blowing out of equities today. There was news China’s manufacturing sector slowed for the third month in a row. The HSBC Purchasing Manager’s index for September- and early forecast, showed a reading of 49.9- anything below 50 suggests contraction.

I don’t believe this was a big surprise to the world as this is a measure of exports, and the global slow down is creating less demand.

However, resilient and growing domestic demand is keeping inflation high. Thursday’s data showed rising input costs, which suggests inflation is still strong.

As I said- the perfect storm. You have manufacturing slowing, but you’re not getting the much needed corresponding drop in inflation. This double whammy has the markets reeling.

In overnight trading:

The Shanghai A shares were down 2.78%, and the B shares down 2.58%, giving back all the previous day’s huge gains.
The IMF cut its forecast for China growth for this year and next. This year was cut to 9.5%, and next year was cut to 9%.
Economists in China are still forecasting waning inflation.

Emerging China Stocks

Category Archives: China Stocks Crushed