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.

2 comments:

getyourselfconnected said...

Try Bolivia as it pertains to PAAS, ugh.

CP said...

Pray, tell us.