It seems that the Singapore listed China companies (or S-Chips) are back in the limelight again.
Two firms, China Hongxing and polyester fibre manufacturer Hongwei Technologies have been suspended from trading due to accounting irregularities.
For China Hongxing, irregularities have been found in the cash and bank balances, accounts receivables, accounts payables and other expenses during the audits of subsidiary companies in China.
For Hongwei Technologies, auditor Ernst and Young highlighted issues pertaining to the cash and bank balances of its Chinese subsidiary Shuangli (Xiamen) Polyester Co Ltd.
The two companies join a list of more than 15 counters which are suspended from trading. The majority of these counters are S-chips companies.
I’m hardly surprised at the latest revelations. Forging fake revenue (with a tell-tale sign of large receivables that never gets collected) is a tactic used by fraudulent China firms to boost their earnings prior to seeking a listing in Singapore. Stealing cash from their bank balances is another.
Unfolding events have pretty much tallied with the confessions of this S-chip CEO which I urge you to read if you have not yet done so.
Fool me once, shame on you. Fool me twice, shame on me.
S-Chips anyone?