The outgoing head of Hong Kong’s securities watchdog has warned that China is “the new dot-com” of the investment world and poses risks to unwary investors, a report said yesterday.
The Wall Street Journal quoted Martin Wheatley, former chief executive of the Hong Kong Securities and Futures Commission, as saying that investors could get burned if they rushed into Chinese firms without putting their books under a microscope.
“Everybody wants a piece of China,” Wheatley said in his 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 certain firms, 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 and some have seen their shares suspended over allegations of accounting irregularities and other improprieties.
Shares in Sino-Forest Corp (嘉漢林業), a Hong Kong-based tree-plantation company listed in Toronto, have fallen in recent days after a short seller published research alleging problems with the company’s accounts. The firm, 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 will later run a new consumer protection group to be spun out of the agency called the Financial Conduct Authority.
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