Salient to Investors:

Jonathan Weil writes:

  • China is a kleptocracy run by, and for the benefit of, the Communist Party elite, who have allowed securities fraud to flourish, and routinely obstructed overseas regulators’ investigations.
  • Tiny research firm Muddy Waters has done more to expose Chinese stock scams than all of the world’s governments combined.
  • Prudent investors start with the assumption that the books of every publicly traded Chinese company are cooked. The same may also be true of the world’s biggest banks.
  • Rapid, debt-fueled growth attracts short sellers.

Erik Lam at Auerbach Grayson said the Zoomlion scandal is not good news for Chinese equities because it is a major Hong Kong-listed company, whereas all past accounting scandals revolved around Chinese names listed in the US.

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