News

Defeated DC candidate Liu Siu Fai admits false claims of support
ICAC, 21-Jun-2017
One of two candidates for the Tsim Sha Tsui Central seat, he lost by a wide margin of 1099 to 486 votes, to DAB candidate Ms Kwan Sau Ling.
Sound Global (0967) accidentally loses financial documents
Company announcement, 19-Jun-2017
How unfortunate. The company says an accident occurred when the documents were being transported to a new file storage facility. The company has been under investigation and suspended by the SFC since Apr-2016. A similar thing happened to China Animal Healthcare (0940) on 4-Dec-2015, while it was suspended and under forensic investigation. A truck loaded with 4 years of financial documents was stolen while the driver was on his lunch break.
SFC suspends Mr Wu Biwei for 6 months
SFC, 19-Jun-2017
He was with iStar International Futures Co Ltd, now known as Rifa Futures Ltd. He is now with Futu Securities International (HK) Ltd.
Webb on "Newswrap" re HKEX third board and GEM
RTHK, 16-Jun-2017
Shareholder activist David Webb says the Hong Kong Stock Exchange, which has proposed setting up a new board to open ways for more mainland tech companies to list in the city, is going in completely the wrong direction. He said Hong Kong should have a single board, rather than confusing the market with more boards. He told Jim Gould that a simpler structure should also have better disclosure and governance requirements.
Rebuilding free markets in HK
Webb-site.com, 16-Jun-2017
These slides are from a presentation by David Webb today, on how HK's free markets have eroded during the 20 years since the Handover, and what HK can do to recover its dynamism.
Defeated DC candidate Shum Tai Fung charged with failing to lodge election return
ICAC, 15-Jun-2017
He got 204 votes, coming second to DAB Chair Starry Lee Wai King, who got 1544 votes to win the seat.
HKICPA fines Wong Kwai Hung HK$25k
HKICPA, 15-Jun-2017
Mr Wong is or was a partner of Wong and Lam.
Concentration warning in Yat Sing (3708)
SFC, 14-Jun-2017
This follows a complaint by Webb-site to the SFC on 14-Jan-2017 and a second one on 31-May-2017 when MSCI put it in their small-cap index. Now they should eject it. The top 21 holders have 90.06% of the company.
SFC commences insider dealing prosecutions over IDS privatisation
SFC, 9-Jun-2017
Mr Lam Yik Tung is alleged to have tipped his friends in Aug-2010. According to Webb-site Who's Who, he worked for BNP Paribas until 17-Apr-2014. BNP Paribas was the independent financial adviser to Li & Fung Ltd on the privatisation.
AAC (2018) announcement seems familiar
Webb-site.com, 9-Jun-2017
AAC, in a rather desperate move, has announced a "strategic cooperation agreement" with CITIC Bank. Where have we seen that before?
HK's narrowing income gap
HK Government, 9-Jun-2017
Census & Statistics Dept slides show, contrary to media and socialists' complaints, HK's income gap has narrowed. Median earned incomes of the bottom 10% rose 46.6% in 5 years, while the top 10% rose 23.6% and price inflation was 18%. Welfare payments and benefits also narrowed the gap in household and individual incomes. HK's per-person, post-tax & benefits Gini dropped from 0.431 to 0.420. Remember, Gini is also a measure of incentive. If all incomes were set by the state and equal, Gini would be zero, there would be no incentive and we would be equally poor, as China was from 1949-1979. Governments should focus on ensuring equal opportunity, not equal incomes, but with a social safety net.
Court of Appeal upholds SFAT's ruling on Moody's Red Flags Report
SFC, 8-Jun-2017
The appeal failed, but the Court held that the SFAT was wrong to conclude that the Report itself constituted credit ratings, because the opinions were not "primarily" regarding creditworthiness - a definitional point which Moody's had failed to make in the SFAT. Nevertheless, the Court held that the Report fell within Moody's Type 10 credit rating activities because it amplified or supplemented its ratings. The right of appeal to the court is limited to points of law, so it does not discuss whether the report was produced to a high enough standard. As Webb-site has previouly opined, it was, and attacking Moody's has had a chilling effect on further licensed research of this nature. Have you seen any other red flag reports since 2011?
Concentration warning in Zheng Li (8283)
SFC, 8-Jun-2017
14 shareholders have 95.53% of the company.
Lerado (1225): SFC minded to suspend stock from 6-Jun-2017
Company announcement, 5-Jun-2017
At last, some action from the SFC. Nearly 2 years after Lerado hit the market with a highly dilutive deep-discount open offer (followed by a deep-discount rights issue 10 months later), it appears to the SFC that the circular dated 26-Oct-2015 included "materially false, incomplete or misleading information". Since the open offer was announced, the total return on the stock has been -90.77%. The SFC is presumably planning further action. Lerado is a member of what Webb-site calls the "Enigma Network".
HKICPA fines CCIF CPA Ltd HK$30k, Betty Tse Po Chu & Lawrence Leung Man Chiu HK$10k each
HKICPA, 5-Jun-2017
Again, HKICPA fails to say which listed company is involved. We can tell you: the only HK-listed client of CCIF with a Jun-2011 year-end and a disclaimer of opinion in the audit report was China Agrotech (1073). Mr Leung, the engagement quality control reviewer, actually works for a different firm, Tang & Fok. The case was referred by the Financial Reporting Council.
Listing Decision on a long-suspended company with insufficient public float
SEHK, 2-Jun-2017
"Company A" is unnamed, but must be China Oriental (0581), which eventually restored the float and resumed trading.
X & Y v HKICPA
HK Court of Appeal, 2-Jun-2017
The court stays the publication of decisions of a Disciplinary Committee pending the outcome of X & Y's appeal. This is despite the disciplinary hearings having been public. The court rules that the "reprimand" part of the sanction "is effectively enforced by publication" (rather than entry in the register) and that this should not happen until appeals are exhausted. In our view, the interests of open justice should outweigh this. In criminal cases, verdicts and sentences are handed down in public despite the right of appeal of defendants. What makes accountants so special? Besides, a fine is always accompanied by a reprimand, so the reprimand adds nothing. The fine won't be enforced until appeals are exhausted. In the interests of open justice, we hope that the HKICPA will appeal this ruling to the CFA.

Our stories

Rebuilding free markets in HK
These slides are from a presentation by David Webb today, on how HK's free markets have eroded during the 20 years since the Handover, and what HK can do to recover its dynamism. (16-Jun-2017)
AAC (2018) announcement seems familiar
AAC, in a rather desperate move, has announced a "strategic cooperation agreement" with CITIC Bank. Where have we seen that before? (9-Jun-2017)
The Enigma Network: 50 stocks not to own
Sometimes, all you need to tell a story is a picture. (15-May-2017)
Holdings in Fullshare (0607) via Shanghai Connect
Nice work by Glaucus Research today in a thorough analysis of the bubble in Fullshare, which also relates to a bubble in Zall (2098) because of their cross-holdings. Webb-site called these bubbles on 5-Aug-2016, and this chart suggests that accumulation of Fullshare by persons on the Southbound train may have propped it up. (25-Apr-2017)
Spilt milk: net CCASS changes after sell-off in China Huishan Dairy (6863)
Trades in Friday morning's collapse were settled yesterday, 28-Mar. We see that mainland investors via Shanghai Connect bought a net 77.6m shares (0.58%), raising their stake to 7.32%, while the biggest net reduction came from Guoyuan Securities Brokerage (HK), 216m shares (1.60%). It's a fair bet that there was a margin call, but we wait for Chairman Yang to reveal all. (29-Mar-2017)
Press statement from WKCDA
Poor transparency: you won't find this on the WKCDA web site, so it's going on ours. We've added a link from the statement to the Procurement Procedures. (22-Feb-2017)
West Kowloon needs tender care
We urge the board of WKCDA, which was bypassed for months in the planning of the Palace Museum, to put the main architectural services contract out to tender, given that there is still no binding contract with Rocco Yim's company. Let him compete for the work, in line with HK's commitments to free and fair trade under WTO obligations. We estimate the contract size at HK$140m. (6-Feb-2017)
RIP Clare Hollingworth
She was born on the same day as the Republic of China and shipping tycoon Tung Chao Yung. She died today aged 105 years 3 months. (10-Jan-2017)
1539 candidates in under 4 minutes
Today, a few people are choosing even fewer people who will select HK's new Chief Executive. Our compilation shows the details of all 1539 candidates for 1034 seats, including 300 uncontested. Last time, the electorate of the 637 densest seats (lowest electors per seat) was 4,363. There is healthy competition in the largest electorates, including Education and Health Services, but the most they can hope for is to tip the balance if 2 establishment candidates run for the job and Beijing doesn't pick a winner and direct its agents from the small circles accordingly. (11-Dec-2016)
Shenzhen Connect southbound tracking
The Webb-site CCASS Analysis System shows the daily net change in the aggregate stock balances held by mainland investors via Shenzhen Connect. Movements correspond to trades 2 days earlier. (8-Dec-2016)
Andrew Left and the right to be wrong
We take a close look at the Market Misconduct Tribunal's report on Mr Left's erroneous criticism of China Evergrande (3333), and what that says about free speech amongst participants in the HK market. (23-Oct-2016)
Open letter to the board of Ming Fai (3828) from David Webb
Webb-site founder David Webb owns almost 10% of Ming Fai and calls for a special dividend of at least $0.352 per share to reduce net cash to not more than HK$300m (34% of net assets) after the sale of the investment property, which we support. Ming Fai has a strong core business, but if the current board, which holds 33% of Ming Fai, doesn't do the right thing then we will nominate directors who will. (19-Oct-2016)
SFC warns market on CIFG (0412)
Following Webb-site's bubble warning on 26-Sep-2016, the SFC has conducted an ownership investigation. (13-Oct-2016)
Alleged hacked BOCI account explains Pa Shun Pharma (0574) surge
A Cyberport-based investment company alleges that an unauthorised person logged into its BOCI account and bought up 4.92% of PSP at an average 36% above the previous day's close, draining its account of about HK$37.7m. The SFC has today commenced a general cybersecurity review on brokers' systems after 16 incidents in the last 12 months involving over HK$100m. (13-Oct-2016)

Other news

Defeated DC candidate Liu Siu Fai admits false claims of support
ICAC, 21-Jun-2017
One of two candidates for the Tsim Sha Tsui Central seat, he lost by a wide margin of 1099 to 486 votes, to DAB candidate Ms Kwan Sau Ling.
Sound Global (0967) accidentally loses financial documents
Company announcement, 19-Jun-2017
How unfortunate. The company says an accident occurred when the documents were being transported to a new file storage facility. The company has been under investigation and suspended by the SFC since Apr-2016. A similar thing happened to China Animal Healthcare (0940) on 4-Dec-2015, while it was suspended and under forensic investigation. A truck loaded with 4 years of financial documents was stolen while the driver was on his lunch break.
SFC suspends Mr Wu Biwei for 6 months
SFC, 19-Jun-2017
He was with iStar International Futures Co Ltd, now known as Rifa Futures Ltd. He is now with Futu Securities International (HK) Ltd.
Webb on "Newswrap" re HKEX third board and GEM
RTHK, 16-Jun-2017
Shareholder activist David Webb says the Hong Kong Stock Exchange, which has proposed setting up a new board to open ways for more mainland tech companies to list in the city, is going in completely the wrong direction. He said Hong Kong should have a single board, rather than confusing the market with more boards. He told Jim Gould that a simpler structure should also have better disclosure and governance requirements.
Defeated DC candidate Shum Tai Fung charged with failing to lodge election return
ICAC, 15-Jun-2017
He got 204 votes, coming second to DAB Chair Starry Lee Wai King, who got 1544 votes to win the seat.
HKICPA fines Wong Kwai Hung HK$25k
HKICPA, 15-Jun-2017
Mr Wong is or was a partner of Wong and Lam.
Concentration warning in Yat Sing (3708)
SFC, 14-Jun-2017
This follows a complaint by Webb-site to the SFC on 14-Jan-2017 and a second one on 31-May-2017 when MSCI put it in their small-cap index. Now they should eject it. The top 21 holders have 90.06% of the company.
SFC commences insider dealing prosecutions over IDS privatisation
SFC, 9-Jun-2017
Mr Lam Yik Tung is alleged to have tipped his friends in Aug-2010. According to Webb-site Who's Who, he worked for BNP Paribas until 17-Apr-2014. BNP Paribas was the independent financial adviser to Li & Fung Ltd on the privatisation.
HK's narrowing income gap
HK Government, 9-Jun-2017
Census & Statistics Dept slides show, contrary to media and socialists' complaints, HK's income gap has narrowed. Median earned incomes of the bottom 10% rose 46.6% in 5 years, while the top 10% rose 23.6% and price inflation was 18%. Welfare payments and benefits also narrowed the gap in household and individual incomes. HK's per-person, post-tax & benefits Gini dropped from 0.431 to 0.420. Remember, Gini is also a measure of incentive. If all incomes were set by the state and equal, Gini would be zero, there would be no incentive and we would be equally poor, as China was from 1949-1979. Governments should focus on ensuring equal opportunity, not equal incomes, but with a social safety net.
Court of Appeal upholds SFAT's ruling on Moody's Red Flags Report
SFC, 8-Jun-2017
The appeal failed, but the Court held that the SFAT was wrong to conclude that the Report itself constituted credit ratings, because the opinions were not "primarily" regarding creditworthiness - a definitional point which Moody's had failed to make in the SFAT. Nevertheless, the Court held that the Report fell within Moody's Type 10 credit rating activities because it amplified or supplemented its ratings. The right of appeal to the court is limited to points of law, so it does not discuss whether the report was produced to a high enough standard. As Webb-site has previouly opined, it was, and attacking Moody's has had a chilling effect on further licensed research of this nature. Have you seen any other red flag reports since 2011?
Previously on Webb-site.com
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