Tag Archives: china etf

China Stocks – Inflating Revenues

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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

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

Chinese Markets Go 5 for 7 – Chinese Markets

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Chinese markets were down again in overnight trading for the third day in a row and the last 5 of 7 days.

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.

 

Continuing South – China has officially become the world’s largest consumer of energy

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While October has been the “Bear Killer” most of the time since WWII, the China sector continues making new lows as speculation continues that the Chinese economy will go directly from overheated inflation to recession.

Not much news out of China over night. The Shanghai Markets were lower for a 3rd straight day and for 5 out of the last 7 trading sessions. The China markets are flirting with the lowest levels in 2 years.

In Wednesday’s trading, China’s Shanghai A shares were down .25%, and the B shares down .14%.

There’s a couple of news items out of China worth mentioning- Here you go:

  • Premier Wen Jiabao was out urging stronger financial support for China’s small businesses. He’s suggesting some bank credit support, preferential tax treatment, and a relaxing of the standards for non performing loans. Also, he wants banks to avoid “adminstrative intervention”. Now, there’s a concept we could use in the US.
  • China has officially become the world’s largest consumer of energy according to BP’s statistical review world energy. BP reports that in 2010, China used 20.3% of the world’s energy, while the US used 19%.
  • Llloyd Private Banking just completed a survey of private investors which concluded China has now become the most attractive market on balance of risk and return, with the UK, Brazil, and Russia coming in distantly behind.  The Lloyds private banking customers noted they were mostly concerned about the Greek situation.

That’s it for today.

Barron’s Bullish on China

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  • China markets were up in overnight trading, being fueled by a moderate decline in the China Manufacturers purchasing index. The Shanghai A shares were up 1.48%, and the B Shares were up .78%.
  • Think there’s no consumer growth in China? Think again. China Telecom reports Q2 profits rose 12% as its mobile phone subscriber base increased by 50%. The stock was up 4.8% on the news in Hong Kong.
  • Markets are firming up very tepidly globally on hopes the Federal Reserve will announce some sort of QE3 program to shore up the US economy.
  • The Chinese Purchasing Manager’s index rose slightly over July – from 49.3 to 49.8. A reading below 50 indicates contraction, but the slight improvement suggests a soft landing.
  • China has made investments in the production of oil in Libya. And, while China has never had a strong relationship with the nearly ousted Gaddafi, they have been supporting the rebel cause. One rebel faction warned China could lose its assets through nationalization, and the Chinese retorted with harsh words.
  • This weekend’s Barron’s cover article suggests it’s Time to Buy Emerging Markets after a 20% drop in China, Brazil, and India-Author Chris Williams notes their currencies are holding up against the dollar and the euro, their balance sheets are strong, and they’ve already completed their deleveraging cycle. Prices are also low as $7.7 billion came out of emerging market funds in August alone.
  • Barron’s also reports legendary and long term Fidelity Fund manager Mark Mobius, a pioneer of investing in China, India, and Russia, is buying up stocks that relate to consumer spending.

12th Five Plans Minimizes China Dependence on Global Macro Picture

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  • In overnight action, the Shanghai A shares dropped .68%, and the B shares dropped 1.8%. The B shares are typically more volatile.
  • Going long BIDU and selling covered calls to generate income. If you don’t understand how to generate income from your positions, sign up for the newsletter and read this past weekend’s edition.
  • Fan Gang- advisor to the China Central Bank monetary policy committee, in speech to 5th annual bankers conference in Beijing, says no double dip- just slower growth. He says China’s main growth driver will not be effected.
  • The 12th five year plan calls for reducing growth to 7%, empowering citizens to purchase more goods, raise the minimum wage, become more creative by developing industries like biotech and electric vehicles rather than simply be the world’s manufacturer, and has a major focus on reducing pollution and stabilizing the energy supply.
  • 78% of over 500 China companies that have provided revenue and earnings forecasts for the year are forecasting both quarter over quarter growth, and year over year growth according to an article at Xinhua
  • China Construction Bank- one of the largest banks in China, announce Q2 profits up 31%