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Monday, November 28, 2011

Chinese Stock Alarm? Sino-Forest May Be the Best of the Bunch

Sino-Forest is a Wholly-Owned Foreign Enterprise that harvests, processes, and sells wood from leased or owned tree plantations in various Chinese provinces. Its international management hails from Hong Kong, China, and Canada. Sino-Forest trades on the Toronto Exchange, is audited by Ernst & Young, and its glossy annual reports boast of master agreements, huge markets, a plantation strategy, and possible a billion dollar loan from Chinese banks.

If you want to invest in China, Sino-Forest appears (or appeared) to be among your best bets.

Sino-Forest’s compelling story generated a market capitalization of six billion dollars and a share price that rose from $10 to $23 while stocks were collapsing worldwide.

That was then. A critical report sent the share price tumbling eighty percent, trading has been suspended for possible violations of security laws, and the Canadian Mounties are investigating for fraud. The company’s outside directors hired PriceWaterhouseCoopers to investigate.

The investment community finally got a clear picture of how business is done in China, did not like what it saw, and dumped the stock. It’s as simple as that.

go to Forbes.com 

3 comments:

  1. The investment community finally got a clear picture of how business is done in China, did not like what it saw, and dumped the stock. It’s as simple as that.

    Gregory Office Chairs

    ReplyDelete
  2. However, there is still a lot of business transactions being done between Canada and China - notably speaking of lumber (forming so called China effect on Canadian economy). Canadian natural resources act as a true lure...

    ReplyDelete