Tuesday 21st June 2016

Dear Reader,

Happy Solstice. It's been too long since our last newsletter!

Submission to Public Engagement Exercise on Retirement Protection
We call for abolition of non-means-tested schemes, staggered subsidies for public healthcare and a deployment of the savings on a higher socal safety net and better healthcare. HK can't pursue a universal handout without breaching the Basic Law, and even if it could, the Laffer Curve may make it unsustainable as taxable profits and earnings would shift away. Finally, the MPF is a costly interventionist failure that should be scrapped, and if it is not, then LSP must be phased out to allow full portability of MPF assets. (21-Jun-2016)

Presentation on HK securities market reform
These are the slides from a presentation by David Webb to accountants hosted by legislator Kenneth Leung this evening. (16-May-2016)

Missing island reappears in Chinese waters

SFC fines State Street Global Advisors HK$4m over Tracker Fund management
SFC, 15-Jun-2016
The Tracker Fund always has a small amount of cash on hand, and SSGA failed to get the best rate on deposits, getting zero from its own bank rather than 0.01% from the market. To compensate, it is paying HK$318,315 into the fund, or about 0.00044% of NAV. Don't spend it all at once. Our take: the Tracker Fund remains the most efficient way for those who cannot pick stocks to own a piece of the HK market, costing around 0.1% p.a. compared with almost 2% on your MPF funds.

SFC fines Schroder Investment Management HK$1.8m for disclosure failures
SFC, 15-Jun-2016
Schroder failed to include in its disclosures of interests shares in client portfolios for which it did not have proxy voting rights. 236 corrected notices were filed in early 2013, but the filings for 2005-2010 remain uncorrected because of different storage formats and systems.

Classroom Investments Inc v Frank Hu Chuanping & others
HK Court of First Instance, 10-Jun-2016
The Ontario Teachers' Pension Plan pursues a soured US$175m pre-IPO private equity deal in Chinese hospitals, alleging fraudulent misrepresentation. Perhaps the deal should have carried a health warning. More than a decade earlier, in Feb-2005, China Hospitals, Inc had filed an F-1 for an IPO on Nasdaq, but this was aborted.

DBS Bank (HK) Ltd v Sit Pan Jit
HK Court of Appeal, 10-Jun-2016
Mr Sit loses his appeal.

Suzanne Ruth Henderson v Scott Henderson
HK Court of First Instance, 10-Jun-2016
Cathay Pacific pilot Mr Henderson, having spent 2 months on unpaid leave at Lai Chi Kok Reception Centre for contempt of court, is now contrite, has paid up, and the court discharges him.

Imagi (0585) pools money with Andrew Liu to punt stocks
Company announcement, 8-Jun-2016
No shareholders' approval is required, because Imagi has already declared securities trading to be in its "ordinary and usual course of business" - and that didn't require approval either. Andrew Liu was from 2010-2015 a non-executive director of Freeman Financial (0279), another company in what we call the "Chung Nam Network". During his time on that board, the stock total return was -92.80%.

Wuyi Pharma (1889): everything failed at our AGM
Company announcement, 2-Jun-2016
With a voting turnout of just 0.63%, all the resolutions were defeated, because the brothers who control the company failed to vote. Incidentally, this Cayman-incorporated company, which has no mainland listing, held its AGM in Fuzhou, making it hard for HK shareholders to attend. Serves them right.

SFC obtains disqualification orders against former senior executives of China Best (0370)
SFC, 31-May-2016
This is a good example of a case in which a connected person of the company (Mr Wang Jian Hua) was hiding behind a BVI company and using a nominee owner, which China Best claimed was an "independent third party". The Stock Exchange Listing Rules still do not require the owners of such shells to be identified in announcements. Eventually the transaction was abandoned.

And much more besides...
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