atans1

S-Chips: putting their cash into S’pore banks

In Accounting, China, Corporate governance on 02/03/2010 at 5:38 am

The ST suggested that S-Chips should deposit their cash in in DBS, OCBC or UOB and not Chinese banks.  This could reassure investors that the S-Chips’  cash were safe.  This would in turn help the shares to trade above their net cash per share.

Err might not be a gd idea. Forget about the practical reasons like

– the companies not having the cash they claim they have; or

– withdrawing the cash after depositing it for reporting purposes and deposting it again just before the next reporting date. To prevent this the banks would need clear mandates to report such actions, and manpower and systems to track such movements.

It could be that the investors are (or will be) concerned that the cash could be used up in unprofitable businesses. Chinese dot.com companies listed on Nasdaq were trading below their net cash positions after the dot.com bust. Investors rightly assumed that they would not see the cash.The cash would be used to fund internet ventures etc. Anything else except be returned to shareholders.

They were right.

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