Friday, April 15, 2011

Score One For China-avoidance Policy! (HQS)

Over the past couple years, a Chinese company called HQ Sustainable Maritime (HQS) would always pop up on my screens for small cap, deep value situations.

However, I have a China-avoidance policy: I don't invest in China. I do this out of lack of familiarity with the country (how can I have an edge?), inability to speak the language, and concern about accounting standards, property rights, and corporate governance.

I just saw on Frank Voisin's blog that HQS is now under suspicion: its auditor has resigned, shares were halted, and the company is postponing the filing of its annual report. Shares are down 42% year-to-date.

So, although I have undoubtedly missed investing opportunities in China, I also avoided a blow-up. HQS seemed virtually risk-free if you believed the reported numbers. It looks like some hedge funds probably got caught long though.


EconomicDisconnect said...

Try Bolivia as it pertains to PAAS, ugh.

CP said...

Pray, tell us.