Monday 18th March 2019

Dear Reader,

Tomorrow we'll close our poll on announcing directors' attendance at general meetings, so please vote now. To deter double-voting, you'll need to login with your Webb-site account e-mail (above) and password, which you can reset if you've forgotten it.

In "Other news" below, you'll find details of the SFC's fines of 4 large sponsors. These were settlements reached by written agreements with the SFC. We asked for copies of those agreements, but the SFC declined. The agreements probably exclude any admission of wrong-doing and prevent further action against the sponsors by the SFC, so investors in Tianhe Chemical and China Forestry won't be able to use the SFC action in evidence if they sue the sponsors as promoters of the stock. The Government collects the fines, and investors are uncompensated.

Now, here's the product of our weekend's work.

Inside the Kingdee bubble
It appears to be a Shenzhen success story, conquering the World with the "Chinese management model", but we burn through the techno-fog of the disclosures and dig deep inside the accounts. You won't like what you see. (18-Mar-2019)

Concentration warning in Reach New (8471)
SFC, 15-Mar-2019
The top 20 holders have 93.74%. The stock listed on 21-Jul-2017 and closed today at $1.51 or 5.03x its IPO price.

Concentration warning in Fullwealth (1034)
SFC, 15-Mar-2019
The top 20 holders have 95.6%. The stock was listed on 30-Oct-2018 and closed today at $1.42, or 4.44x its IPO price.

SFC fines Merrill Lynch HK$128m for sponsor failures
SFC, 14-Mar-2019
On the Tianhe Chemicals (1619) IPO in 2014. Notably no human at ML is named as responsible for the failings - perhaps that will come later. ML scores a lower fine than fellow sponsor Morgan Stanley at HK$224m for the same deal. UBS scored HK$375m, but that was for a hatrick of listing applications.

SFC fines Morgan Stanley Asia Ltd HK$224m for sponsor failures
SFC, 14-Mar-2019
The firm jointly sponsored Tianhe Chemicals (1619) in 2014, with UBS and Merrill Lynch. Notably this announcement doesn't mention any human at MS as being responsible - perhaps that will follow later.

SFC fines Standard Chartered Secs HK$59.7m for sponsor failures
SFC, 14-Mar-2019
For the 2009 IPO of China Forestry (now delisted), which it jointly sponsored with UBS. Together they win our "can't see the wood OR the trees" award for epic due diligence. Notably no human at SCS is named as responsible.

SFC fines UBS HK$375m and suspends its sponsor licence for 1 year
SFC, 14-Mar-2019
Over the IPOs of China Forestry in 2009 (now delisted), Tianhe Chemicals (1619) in 2014 and a third as-yet unnamed listing application.

Concentration warning in KNT (1025)
SFC, 13-Mar-2019
The top 20 holders have 93% of the stock, which has more than tripled in price since its 28-Feb listing.

Concentration warning in Grand Investment (1160)
SFC, 8-Mar-2019
A rare concentration warning in a Chapter 21 (closed-end investment fund) company. 20 holders have 97.96% and it trades at about 21x NAV.

SFC directs suspension of China DYF (0612)
SEHK, 8-Mar-2019
This follows a complaint by Webb-site to the SFC on 18-Feb-2019 and a Bloomberg article on 22-Feb-2019. This is a "Chapter 21" closed-end investment fund, trading at about 86x NAV. Such companies are exempt from the public float requirement of the Listing Rules, and the SFC has not issued any concentration warning on this stock. Consequently it has been admitted into various HSI and MSCI indices, exacerbating the bubble. It was due to enter the HSI Large and Mid-Cap Index at the close of business today.

HKICPA permanently removes Deborah Annells, convicted thief and fraudster
HKICPA, 5-Mar-2019
Comment: The findings were made on 13-Feb-2018 and the sanctions determined on 15-Nov-2018 but only now announced. A right of appeal does not justify keeping these secret. The HKICPA lacks the transparency expected of a regulator. The committee criticises the HKICPA for failing to simplify matters by amending its case on the basis of Ms Annells' convictions, and for sloppy bundles.

SFC fines Guosen Securities (HK) HK$15.2m for breaches of AML requirements
SFC, 18-Feb-2019
The firm processed over 2200 suspicious third-party deposits (i.e. not made by clients but into their accounts) totalling over HK$2.3bn in 14 months up to Dec-2015.

Webb on "Backchat" re MPF
RTHK, 18-Feb-2019

Central Wealth (0139) raises CEO's salary by 400%
Company announcement, 15-Feb-2019
The boost to HK$6m is "to provide incentive…to strive for the continual development and expansion of the Group" - but the pay is not performance-linked. Central Wealth is part of the Huarong-CMB network we warned readers about on 19-Oct-2018. The stock has dropped 64.1% since Mr Xu Ke joined the board as CEO on 27-Feb-2018.

And much more besides...
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David M. Webb