Beware of China investment risks: outgoing HK regulator
2011-06-09 11:24:33
The outgoing head of Hong Kong's securities watchdog has warned that China is "the new dot-com" of the investment world which poses risks to unwary investors, a report said Thursday.
The Wall Street Journal quoted Martin Wheatley, former chief executive of the city's Securities and Futures Commission (SFC), as saying that investors could get burned if they rush into Chinese firms without putting their books under a microscope.
"Everybody wants a piece of China," Wheatley told the paper in a final interview before leaving his post.
"Therefore, there has been a rush to Chinese companies" without investors asking the normal questions about their fundamentals, he added, comparing the run-up to the ill fated Internet stock boom of the late-1990s in the US.
Wheatley, who spent 18 years at the London Stock Exchange before taking the Hong Kong post in 2005, also said investment banks and brokerages that underwrite Hong Kong share listings must do a better job at keeping substandard companies at bay, the Journal report said.
Worries about the accuracy of Chinese firms' books have long dogged the country and Wheatley's comments come amid heightened scrutiny of some Chinese companies, particularly those with foreign listings.
The US Securities and Exchange Commission is probing accounting issues at several Chinese companies that trade on US stock exchanges, with some Chinese companies having seen their shares suspended over allegations of accounting irregularities and other improprieties.
Shares of Sino-Forest Corp, a Hong Kong-based tree-plantation company listed in Toronto, have dropped in recent days after a short seller published research alleging problems with the company's accounting.
The company, which has its assets in China, has called the research inaccurate and says it is investigating the allegations.
Wheatley is taking up a temporary position as managing director of the UK's Financial Services Authority, and later running a new consumer protection group to be spun out of the FSA called the Financial Conduct Authority.