David Webb, former investment banker and Deputy Chairman of Hong Kong’s Takeovers and Mergers Panel of the Securities and Futures Commission (SFC), has published an article entitled ‘The Huarong-CMB network: 26 stocks not to own’, with two listed companies, China Huarong Asset Management Co Ltd (Huarong) and China Minsheng Banking Corp Ltd (CMB), as the main characters in this incident. The post reveals the secret complicated relationship between 26 Hong Kong stocks which may involve manipulation of Huarong and CMB, leading to potential bubble problem in the stock market.
China Huarong Asset Management Co Ltd has been trapped in the scandal of its former Chairman Lai Xiaomin, who is involved in a corruption investigation carried out by the Chinese government, and was arrested and charged for his misconducts. This incident has negatively affected the image and stock price of Huarong, while it is expected that negative impacts will carry forward after Webb’s article was published.
In addition to the impacts on Huarong, CMB and other stocks mentioned in Webb’s article, this incident also puts the governance issue of listed companies in Hong Kong under spotlight. Thomas Atkinson, Executive Director of Enforcement Division of SFC, has mentioned in a recent public speech that the SFC has been targeting on corporate fraud, such as suspicious fund raising, round robin transactions, and customer or sales falsification fraud. He points out that 136 investigations were carried out in 2017 in which around 100 entities and individuals are still under investigation and considered high priority cases, whereas legal actions will be taken in 2019 against convicted parties.
This is David Webb’s second article regarding the suspicious relationship between various Hong Kong stocks. His previous work entitled ‘The Enigma Network: 50 stocks not to own’ was published in 2017 and aroused serious consequences such as drastic fall in stock price, suspension of stock trading and joint investigation of ICAC and SFC. It is hoped that the two articles can serve as reminder to investors and the general public in order to avoid being deceived by big listed companies.
Link to David Webb’s article: https://webb-site.com/articles/huarongcmb.asp
