Keep the short times rollin’
As journalists, we would like to begin this post by expressing our gratitude to the horde of crooked Chinese managers who continue to generate headlines. Months ago we said that the drama of sordid scams and unscrupulous auditors emerging from Chinese companies listed on foreign exchanges would wind down soon. Wrong, wrong, wrong. Graft is apparently the gift that keeps on stealing. For example, this week we had AutoChina, an enterprise our Company Reports team was already flogging on the basis of its stated financials, trying to get away with not stating financials. NASDAQ regulators laughed off the company’s request to delay reporting on 2010’s performance until the very end of 2011, and instead told the company it would be delisted as of September 19 unless it appealed. It appealed, and the story goes on.
Then, there was yet another attack by short-seller Muddy Waters (in cooperation with short-selling Borg collective “Alfred Little”) on Chinese miner Silvercorp. Silvercorp stands accused of falsifying its financials – the Toronto-listed company reported a profit in Canada and a loss in China for the same period – and fabricating customers. Particularly suspicious is the National High-Payin’ Silver-Buyin’ Win-Win Take Innovation as Key Link Corporation, headquartered on the forest moon of Endor. The icing on the cake is the fact that Silvercorp is the subject of two separate investigations, one by the British Columbia Securities Commission and another the Royal Mounted Police! Has Silvercorp been smuggling blended whiskey into US speakeasies? Finally, and tangentially, we have another variation on the “let’s assume foreign regulators are drooling morons” strategy: Three senior executives of Chinese resource investor Hanlong Mining were detained in Australia for apparently investing in the stock of a company Hanlong intended to buy shares of right before the sale was announced. Subtle as a car bomb. Perhaps they will be exchanged for poor Stern Hu.
In other news, the EU continued its steady march into the abyss – the good news being that, with discussions of a Greek default becoming ever-more public, the crisis may be nearing some kind of resolution. On Tuesday, markets were bolstered by reports that China and Italy were holding secrets talks over bond purchases. But Grandpa Wen, lovable as he may be, shattered those hopes on Thursday when he told the World Economic Forum in Dalian that China wasn’t ready for a long-term commitment. Europe has some issues to deal with – like cutting its deficits and opening its markets – before China would be willing to take the plunge, he said. Then Wen really stunned the crowds by going for the shake-down: If the EU wanted to, let’s say, give China market economy status, then the money tap might flow. Wen’s attitude, however warranted, represented a sharp shift in rhetoric. It was only June when he toured Europe speaking of pandas, sunshine and jingji hezuo. Since then, China has not really put its money where its mouth is; analysts suggest that it has bought only limited amounts of EU sovereign debt. But that should come as no surprise, as our columnist William McCahill, Jr wrote in July. China’s cooperation with the EU has always been in its commercial interests, and not an act of generosity. And when it comes to EU bonds, who can blame Beijing for being a bit skeptical? As the FT points out, many Chinese think it’s ludicrous to bail out decadent Europeans only a few generations after their colonies were pushed out of the country. Unless, of course, the bonds would be a good investment. At this point, however, the good ship EU is not looking particularly seaworthy.