Why? First, Chinese company stock prices remain very volatile, because of hedge funds. There are only several dozen good Chinese companies traded on the New York Stock Exchange and NASDAQ, so hedge funds control an inordinate amount of Chinese equity. If they grow bearish or need liquidity, they might sell stakes quickly. Second, despite some improvement, the transparency of Chinese firms remains questionable… Many Chinese companies keep three sets of books, one for the tax bureau, one for investors and one for senior executives.
Take care when investing in China – Shaun Rein
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Shaun Rein by Fantake via Flickr