China Gaoxian

[pianist]

i learnt that for penny stocks - is always pay to attend the AGM and get a feel of the mgt. I encourage fellow forumers to actively interact with the mgt be it from AGM, or company visit, and it will be beneficial to everybody if these face-to-face discussions can be brought to this forum to share with all of us

[touzi]

Shouldn't SGX insist that the auditor provide more information to the public? If not now, at least when the whole episode is closed. Things like how was the error ( I will not all it a fraud at this stage since investigation is probably still ongoing. ) discovered, how was it missed in previous audits , etc are important.

[iisterry]

It is also too easy to shift the blame on the people "who walked in with their eyes open".

I don't want to refute all your examples as the proportion of liability differs. It takes 2 hands to clap, correspondingly if a mistake is made, the cause is not one-sided.

A more appropriate response to the mistakes would be to acknowledge them and work in tandem to correct it instead of absolving any one party of all guilt.

YMMV.

It is just sooooo easy to bash the authority and blame them for everything.

S-chips audit issues? Its SGX's fault. Why let in this questionable companies?

Property price too high? Blame Mah Bow Tan. Why did HDB not build enough flats?

Car prices too high? Blame LTA for the COE system. Blame MAS for allowing lapse limit on car loans.

ERP too high? Road too congested? Blame LTA for not building enough roads.

Lost yr underpants investing in the Lehman minibonds? Blame MAS for allowing the banks to promote the products.

Anything else? And you wonder why people still considers us a nanny state?

As far as investment is concerned. Anyone who want to put money in S-chips, minibonds, unit trusts, profitable plots, or any of the many other exotic investments that promised 1000% returns; and lost his money in the process - only has himself to blame.

[[DY]]

It is just sooooo easy to bash the authority and blame them for everything.

S-chips audit issues? Its SGX's fault. Why let in this questionable companies?

Property price too high? Blame Mah Bow Tan. Why did HDB not build enough flats?

Car prices too high? Blame LTA for the COE system. Blame MAS for allowing lapse limit on car loans.

ERP too high? Road too congested? Blame LTA for not building enough roads.

Lost yr underpants investing in the Lehman minibonds? Blame MAS for allowing the banks to promote the products.

Anything else? And you wonder why people still considers us a nanny state?

As far as investment is concerned. Anyone who want to put money in S-chips, minibonds, unit trusts, profitable plots, or any of the many other exotic investments that promised 1000% returns; and lost his money in the process - only has himself to blame.

I agree with this. I am an active investor and I do have one s-chip in my portfolio. So these concerns are quite real for me.

I honestly wouldn't blame SGX on this. They are in a pretty difficult situation. They want to compete and be a viable exchange in the region but SGX lacks the economic hinterland that SEHK has. If we were to shut our doors entirely to s-chips, our desirability as a listing venue would hit new lows. Already, we're considered a backwater exchange compared to the SEHK.

And SGX officers do try very hard. In my limited experience, they are extremely persistent and dogged in their questioning when they spot an issue they are uncomfortable with. It is also interesting to note that E&Y was also the auditor for Gaoxian during the IPO, and that they had provided the sign-off on the accounts during the IPO. For them to do an about-turn now shows that they too were hoodwinked during the IPO process. In all fairness, it's quite hard for SGX to police them all with a microscope. At last count, I think SGX has slightly under 800 companies listed on it. The sheer number of it is already quite a logistical challenge.

As for the sale of shares by insiders under IPO price, it's hard to say whether that is a sign or not. Please note that substantial/controlling shareholders typically do not acquire their shares at the IPO price. They acquire their shares before the IPO process and typically during the restructuring. As such, their cost of acquisition of the shares is typically way below the IPO price. Coming back to the Gaoxian example, Carry Luck acquired its 150 million shares at S$0.0985 each. So selling at S$0.160 still nets a tidy profit for them.

[Jared Seah]

It's so refreshing to find a forum with contributors that put forth both sides of the argument instead of just bashing one party.

Can't be that if I make money - I so clever!!!

But if I lose money - Hey! Why SGX never protect me?

[mrEngineer]

I think the main purpose/intent of this thread is to share lessons learnt and move on. We can point fingers here and there for a while but the world does not change with a group of us typing in a forum. As owners of our own $$$, we have to responsible for them and take real actions if necessary to protect it at all cost. Those whom need not take any action, just sit back and appreciate the insights that fellow contributors have been sharing. It is their material information after all!

[Blackjack]

Aiyo...before we get all philantrophic and kind-hearted here, let's not forget the ultimate role of a regulator. I think it is already widely recognised that the dual role of SGX as both a regulator and a stock exchange is not ideal. You can read more about it here.
http://www.mas.gov.sg/news_room/parliame..._2001.html

Whilst I would not disagree that the lamb has a large responsibility to undertake in straying into a lion's den, the park ranger cannot absolve himself from all responsibilities by saying "caveat emptor" on basis of difficulty to ensure. A new take-away should accompany the experience of each new incident, not to mention many of these farces we see are repetitive. To disclaim everything by argument of difficulty is a true failure in itself. To forgive and forget if nothing has been done to improve the situation is not doing ourselves any justice either.

Some of these constant cash calls may not be obvious to some investors out there, though I remember highlighting the risk of such companies in Taisan's thread previously. Time will tell what else will implode. For now try to figure out what else is hanging on thin threads and not be overly confident in our special ability to see value where others don't.

[Musicwhiz]

For now try to figure out what else is hanging on thin threads and not be overly confident in our special ability to see value where others don't.

I like this line.

This is why I always say that investing successfully over a long period of time is NOT an easy task.

[iisterry]

Aiyo...before we get all philantrophic and kind-hearted here, let's not forget the ultimate role of a regulator. I think it is already widely recognised that the dual role of SGX as both a regulator and a stock exchange is not ideal. You can read more about it here.

We must also remember that MOF, MAS owns a large part of SGX.

[Musicwhiz]

Sounds like more trouble.....

Business Times - 22 Apr 2011

China Gaoxian appoints special auditors as key execs step down

Interim CEO, new CFO named; PwC to work with statutory auditors E&Y

By LYNETTE KHOO

CHINA Gaoxian has launched a special audit as its financial status remains murky, while several senior management executives are stepping down with immediate effect.

PricewaterhouseCoopers has been appointed special auditors to review its financial affairs for fiscal 2010 and the quarter ended March 31.

Pending the results of the special audit, China Gaoxian chief executive and chairman Cao Xiangbin has agreed to step down as CEO, while the board has accepted the retirement of chief financial officer Raymond Wong. Two other executive directors Lau Chung Kong and Liu Yijie also stepped down from the board.

'Although certain additional information has been given to the auditors, such information was incomplete and as such, the auditors were still unable to reconcile the bank balances,' said the Chinese textile maker yesterday.

'Consequently, the auditors remain unable to conclude on the cash and bank balances and the underlying sales and purchases and capital expenditure transactions.'

One of its subsidiaries appeared to have additional bank loans but there is insufficient information for statutory auditors Ernst & Young to ascertain when these bank loans were taken up and how the proceeds have been used.

The special auditors will report their findings on a periodic basis to the audit committee (AC), the Singapore Exchange and the Korea Exchange, while statutory auditors Ernst & Young will work with the special auditors to complete the audit for fiscal 2010, the group said.

Non-executive director Jerome Tham will take over as interim CEO. Chen Guo Dong, who has been assisting Mr Wong since January 2010, has been appointed CFO with immediate effect. He will report directly to Mr Tham and the AC.

Trouble at China Gaoxian started brewing in March, when its auditors could not verify or confirm the bank balances for two Chinese subsidiaries for the fiscal year ended Dec 31, 2010, triggering a trading suspension of its shares.

Other S-chips that recently reported accounting irregularities in rapid succession include Hongwei Technologies, China Hongxing and Sino Techfibre.

China Gaoxian's AC has been in active discussions with Mr Cao since the accounting problem was flagged, the group said.

During the visit by the AC members to the group's subsidiaries, they found that factory operations in Huzhou in Zhejiang province and Fuzhou in Fujian province are still ongoing. The management has also confirmed that there were no disruptions to their operations.

China Gaoxian said that it plans to appoint a new Korean independent director to its board and to reconstitute its board committees.

It has also appointed Rajah & Tann LLP as Singapore legal counsel, Jipyong & Jisung as Korean legal counsel and Tian Yuan Law Office as China legal counsel to advise the board and assist in any legal matters.