Chinese companies listed overseas, mainly in the US and Hong Kong, have suffered an increasing number of fraud allegations this year, as the developing industry of funds that publish negative research on these stocks while shorting them finds more targets.
The hardest-hit stocks tend to be smaller companies that went public via the reverse-merger process, in which the Chinese company takes over an already-listed US public shell company.
“One company in my portfolio,” says a Shanghai-based fund manager, “is a great business trading at barely three times price/earnings.
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