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Scandal Resurfaces, Confidence Down

By Jeanne Grant,2014-02-17 20:01
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Scandal Resurfaces, Confidence Down

    Scandal Resurfaces, Confidence Down

    Therecentmarketupturnmaybehaltedby byRENWEI

    BusinessediLorofShanghaiDaily

    ?ThescandaIis

    aconcernfor

    savvysecurities

    investorswho

    a-1eworriedthat

    theexposure

    ofShanghai

    wrongdoing

    couldopen

    afloodgate

    formore

    irregularities

    onthebullish

    market

    anotherhighprofilecorporatescandal ScandaIResurfaces,

    ConfidenceDown

    I_henewsthatShanghaiWoddbestPharmaceuticaJCoinflatedearn.ingsandsalesbetweena

    ooiand2004hasmarredthebullishstockmarketandcautionedlnvestorsinChinesemaii1la-_

    d-Ilstedshares

    Shanghaiw0rldbestamedicineunitofChina's State.ownedtextileaudpharmaceuticalcon. #omerate,saidinastatementthatjtusedinac.

    curatedatatojnflateprofitby65I1millionyuan fUS$8.imillionlfromZOOrto2004

    OnMarch1.ChinaBusinessNewsfCBN).

    aShanghai.basedfinandaldafly,saidjnanarticle thatShanghaiWorldbestwassuspectedofcook, ingthebooksinpastyears.CBNwastippedby anonidentifiedinvestorwhocitedareportbya MinistryofFinanceoda1assignedtoinvestigate

    thelistedcompanysfinancialconditionsShares ofShanaiWoridbesweresuspendedinthefo1.

    1owingweek.Lmfi1afterthecornpatrypublished thestatementadmittingithaddresseduPearn. ings.SttanghaiWorldbestpostedalOSSofto5 millionyuanfUS$z3.i2,million1inzOO5.oro.721 yuanashareAccordingtoCBN.between2OO1 andzoo4,thecompanyinflatedprofitbyI57 millionan(US$I96million)inaggregateand overstatedsalesby257millionyuanfUS$3z.1rail. 1ionlAfterremovingthefalsifieddatainitsha1. ancesheets,ShanghaiWorldbestactuallyshowed lossesin2,OO1,2002andzoo4.ratherthat]prof: its.necompanyhopedtosel1additionalshares bvsiftingearnings.leavinginvestorsawarped viewofitsactua1financialsimation.Cornpanies arenotallowedtoraiseadditionndsthrough placementunlesstheyreportconsecutiveearn? ingsforthreeyearsOnFebruary6,Shanghai Worldbestsharesbegantheirupwardmomen. tum.peakingat4.o5yuanashareonMarchia riseof68percentThesharessankq8percent

onApriliowhentradingwasresumed.

    ThescandalisaConcernforsavvysecuri- tiesilivestorswhoareworriedthattheexpo- sureofShanghaiWorldbest'swrongdoing couldopenafloodgateformoreirregularities onthebullishmarket.Theaccountingtricks theeomPanYusedhaveremlndedinves. torsofthecountry'sbiggestcorporatefraud case.Biochemica1firm,GuangxiacYinchIan1

    1ndustryCoLtd.wasviewedasoneofthe buechiDsontheShanghaiandShenzhen exchangesandwasseenasaninnovativeprofit starinthebiotechnologyindustry.Guangxia overstateditsearningsby77I.6millionyuan (US$93.41=_il1]on)between1998andthefirst 1aalfof2OO1.Thecompany,basedinNingxia HuiAutonomOUSRegion.fabricatedexport orderstoingateitsincome.Guanzxiawas 1aterinvolvedIo1awsuitsas847disgrun. tledinvestorssoughtforCOITlpensat]onafter beingswindledbythecompany.

    ThescandalsurroundingShanghai

    Worldbestalsodimstheoutlookforoverhau1. ingitsstrugglingparent,analystssay.China ResourcesHoldingsCoaHongKong-listedrrn backedbythecentraJgovernmentandventure capitalfirmCDHFundweresaidtohavepur- chasedChinaWorldbestinabailoutprogram, CBNreportedinitsApri127edition.citingYan Biao.amanagerofWorldbestsadministrative

    commi~ee.WorldbesfOWllSnetassetsof2.bil- lionyuanfUS$3t2.amillion1.whileowingbanks 25.ibillionyuan(US$3I3billion.theChina

    SecuriflesIournalsaid.TheChinaSecurities Regu]atoryCommission'sShanghaibrsnchand theShanghaistockexchangeareprobingintothe Shangha]Worldbestcaseanddetailsofthecase areexpectedtocomeoutaftertheinvesfigation AnalystssaythescamwillhurtChinaResources confidenceindebt.riddenChinaWorldbestand de1aytherestructuringpace?

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