hey I found some shares I want to buy on Hong Kong Stock Exchange but it seems too good to be true. a) Is there a website (other than seekingalpha) where I can lookup if it's a scam? b) How large a market cap and how famous an auditor before it becomes low risk of scam and more legit? Like if the company is over a billion market cap and has a well known US Auditor.
All you need is this simple rule of thumb: If a Chinese company reports financials that are "too good to be true", then you can be 100% certain that those financials are in fact too good to be true.
Define what you mean by a 'scam' in this context. For example, are you alluding to misreporting of facts in the companies reporting? Misappropriation of company funds by a director? I suspect you're thinking something along the lines of Sino-Forest, and Carson Block and his Muddy Waters Research. Whilst Hong Kong does have have occasional rogue companies and their officers exposed for wrongdoing, the majority of these are mainland Chinese companies, and frequently listed on the second tier market (GEM) rather than main board. It seems to me that most of the recent cases of Chinese companies revealed to have over-inflated or non-existent assets, loans to directors for personal projects etc., are those listed on Nasdaq or TSX. They listed there because it was easier to pass scrutiny, which doesn't say much for US regs. If a company is listed on HKex and its shares are actively trading (meaning, not suspended), then that means there are no red or yellow flags as far as the regulators are concerned. Beyond that you'd have to do your own digging by searching Google etc., for adverse comment.
Just remembered, this guy has a history of incisive and reliable investigation of HK-listed companies that may not be as wonderful as their chairman's statement claims:
well i dont know myself but a short hedgefund manager called brontecapital said so. or so he believed i believe. or maybe it was some other source. hong kong is not china. if a chinese lists on HK doesnt mean chinese is legit. there have been wellknown scams from China listed on HK. these two are worlds apart. HK is like singapore. In 2008 u had famous like ferrochina on singapore was a fraud and stuff. singapore regulators could not reach into china. HK regulators cant also.
people in glass houses shouldn't throw stones.... remember Peregrine Financial, MF Global, Bear Sterns.....should I continue?....
If you want to become enormously wealthy by 'misappropriating' other people's money with minimal risk of ever going to jail, there are three good options: 1. Go into politics. 2. Go into investment banking. 3. Set up a US listing for a Chinese company.