Alarmist reports on Chinese listed companies may deceive overseas investors
By Published: Sep 12, 2017 08:33 PM
Short sellers never tire of accusing overseas-listed Chinese companies of fraud, but the market doesn't buy the story all the time.
The latest example is a documentary, called The China Hustle, which premiered on Friday at the Toronto International Film Festival and features US short sellers such as Carson Block, founder of Muddy Waters.
The film alleges that Chinese Internet giant Alibaba and other Chinese companies have engaged in various fraudulent practices such as inflating their earnings, deceiving investors about their business scale and listing shares in the US through reverse mergers, according to a report from variety.com on Saturday.
At the end of the film, with a voiceover warning that US investors and regulators should do more to protect themselves from fraud by Chinese companies, it shows footage of Alibaba executives ringing the bell for the company's listing on the US stock market in September 2014.
However, Alibaba did not go public through a reverse merger, and as a globally prominent company, Alibaba has always kept its operations open and transparent, the company told the Global Times in an exclusive interview on Sunday.
It is not known if any of the filmmakers or short sellers have short positions in Alibaba's shares, but it is certain that investors will be hurt if they mindlessly believe the film.
In the same interview, Alibaba expressed sympathy for those who had sustained huge losses from shorting its shares and said that the market is the most efficient measure of value. The company also noted that any Chinese company that lists in the US has undergone a full review and remains under the strict supervision of market regulators.
Moreover, public data show that large institutional investors are adding Chinese companies with high growth potential like Alibaba to their portfolios. These institutions are professionals when it comes to value judgment and risk control, so they are the best endorsements of the performance and growth of outstanding Chinese companies.
There have long been forecasts of the collapse of Chinese companies in overseas markets, which appears to be an emotional response to the rise of the Chinese economy. Such expectations have led to lots of negative reports and analysis, but these simply serve to meet the psychological needs of those who create them, regardless of whether they are correct or justified.
Investors should not be misled by individual extreme cases so they don't miss the opportunity of investing in truly valuable companies.
The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn
The latest example is a documentary, called The China Hustle, which premiered on Friday at the Toronto International Film Festival and features US short sellers such as Carson Block, founder of Muddy Waters.
The film alleges that Chinese Internet giant Alibaba and other Chinese companies have engaged in various fraudulent practices such as inflating their earnings, deceiving investors about their business scale and listing shares in the US through reverse mergers, according to a report from variety.com on Saturday.
At the end of the film, with a voiceover warning that US investors and regulators should do more to protect themselves from fraud by Chinese companies, it shows footage of Alibaba executives ringing the bell for the company's listing on the US stock market in September 2014.
However, Alibaba did not go public through a reverse merger, and as a globally prominent company, Alibaba has always kept its operations open and transparent, the company told the Global Times in an exclusive interview on Sunday.
It is not known if any of the filmmakers or short sellers have short positions in Alibaba's shares, but it is certain that investors will be hurt if they mindlessly believe the film.
In the same interview, Alibaba expressed sympathy for those who had sustained huge losses from shorting its shares and said that the market is the most efficient measure of value. The company also noted that any Chinese company that lists in the US has undergone a full review and remains under the strict supervision of market regulators.
Moreover, public data show that large institutional investors are adding Chinese companies with high growth potential like Alibaba to their portfolios. These institutions are professionals when it comes to value judgment and risk control, so they are the best endorsements of the performance and growth of outstanding Chinese companies.
There have long been forecasts of the collapse of Chinese companies in overseas markets, which appears to be an emotional response to the rise of the Chinese economy. Such expectations have led to lots of negative reports and analysis, but these simply serve to meet the psychological needs of those who create them, regardless of whether they are correct or justified.
Investors should not be misled by individual extreme cases so they don't miss the opportunity of investing in truly valuable companies.
The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn
