Advancing a Free Society

Chinese Stock Alarm?

Sunday, November 27, 2011

Sino-Forest is a Wholly-Owned Foreign Enterprise that harvests, processes, and sells wood from leased or owned tree plantations in various Chinese provinces. Its international management hails from Hong Kong, China, and Canada. Sino-Forest trades on the Toronto Exchange, is audited by Ernst & Young, and its glossy annual reports boast of master agreements, huge markets, a plantation strategy, and possible a billion dollar loan from Chinese banks.

If you want to invest in China, Sino-Forest appears (or appeared) to be among your best bets.

Sino-Forest’s compelling story generated a market capitalization of six billion dollars and a share price that rose from $10 to $23 while stocks were collapsing worldwide.

That was then. A critical report sent the share price tumbling eighty percent, trading has been suspended for possible violations of security laws, and the Canadian Mounties are investigating for fraud. The company’s outside directors hired PriceWaterhouseCoopers to investigate.

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