Hongwei special audit is out, and the report is damning. It's not a case of poor coporate governance or accounting oversights but intentional frauds. This will again badly slammed the images of s- chips. I fear another sell-down in this sector. Recently I had a chat with a friend who is a CFO of a s-chip company. He mentioned that extra cautious so be applied to s-chips that are private owned as there is less controls and more incentive to "do" it's accounting records. When I mentioned there are stated own companies that got into trouble too and some private-owned s-chips which seem to have done very well in hong kong exchanges, he mentioned- you are properly right, but when these private companies accounts are concerned, your guess is as good as mine. Maybe some food for thoughts... This sector will no rebound anytime soon. The trading of s-chips is made more risky now. While there are definitely money to be made, as clean companies will most properly privaitise their companies, there are many more variables that is crucial to trading in s-chips, such as entry price, timing, robust cut loss systems. Buy and hold may not be a sound strategy for some or most s-chips. Not for the fainted hearted, but rewards might await those who are still willing to venture into the tiger dens
yes, very stupid of the Hongwei chairman & whoever else are involved. for short-term gain, they have destroyed their own credibility, their very business and future. Shame on them!
As an interim measure the Audit Committee has made the following decisions:
1. The Company should stop trading with Wanzhong with immediate effect as Mr. Lin Shengmin the majority owner of Wanzhong could be the father of Mr. Lin Jimiao, making transactions with the Company as interested party transactions. Mr Lin Jimiao should make good any losses that the company had suffered as a result of the above said interested party transactions with Wanzhong.
2. In view of KPMG’s findings, the Audit Committee would like the directors namely, Mr. Lin Jimiao and Mr. Wu Gouxin who were implicated in the report to step down as directors. As Madam Zhuang XinXin is the spouse of Mr. Lin, she should also resign.
What was rather strange was how the company Balantly and unintelligently tried to cooked the books. It seems to hints at wrong doing by the xiamen bank too, at least that Xiang Yu branch of Xiamen bank. But a rather silver lining is that hundred million of cash is found in Ping An Bank which is not recorded in previous accounting exercises. Hopefully the company can get back some of it's money.
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