Chinese IPO in Malaysia

Do you know that Malaysia is one of the target countries for China companies to raise capital?

There are already 3 China-based companies which listed in Bursa Saham; they are Xingquan (Shoe maker), Multi Sports and Xideliang.

And there are a slew of other China companies awaiting their IPO listing with the Bursa; China Haikul Ltd (Seafood Products and Manufacturer), K-Star Sports Ltd (Sports footwear maker), Sozo Global Ltd (Convenience Food Producer), Fashion International Holdings (Design and Marketing Menswear), China Ouhua Winery Holdings Ltd (Wine maker for Chinese and foreign labels), and Asia Paper International Holdings (manufacturer of testliners).

A couple of things we need to consider here with regards to the Chinese stocks;

1. There are a couple of accounting fraud cases from Chinese listed companies in Singapore, making fund managers wary about the credibility of Chinese accounting practices

2. The companies that are listed or applying for listing are companies in the lower rung of value chain. Yes they are growing fast because of the cheap goods they are offering but such companies usually are not ble to sustain their competitiveness for a very long time.

3. They are currently under the radar among the fund managers due to the above. Not only that, their shares had all since listing fallen lower than their IPO price. Xingquan price current price is RM1.15, compared to its IPO RM1.71. Even though their PER is around 3 or less they do not seem to be able to attract interested parties. In fact Multi Sports' initial investor, the Quek Leng Chan's family's GuocoLine Group Managmenet Co. Ltd sold their stocks shortly after its listing.

One very interesting thing about China companies listing here is that, some financial analysts were invited to go to China to visit their manufacturing sites and all to understand more about the companies, these analysts decided to discontinue their research after this initial reports of their visit.

So to invest or not to invest in China-based local stocks? May the buyers beware.