This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Asian Citrus Shares Suspended

Asian Citrus (ACHL) is one of those Chinese AIM companies that you have heard so much about – for example in the BBC Radio Programme reported on in my last blog post. The revenue has been falling and the losses rising at Asian Citrus but any investors still holding the stock are going to have a very bitter taste in their mouth after the latest announcement.

Today (29/9/2016) the company announced that it could not issue its Annual Accounts on time and hence the shares have been suspended on both AIM and the Hong Kong Stock Exchange. What’s the problem? Simply that the auditors have met a Mr Man Gui Fui, a manager in the company’s subsidiaries who has provided bank statements that seem to bring into question those previously reviewed and in addition another manager, Mr Chen De Qiang, has indicated that balances on customer and supplier accounts may be incorrect. The auditors (who incidentally changed in January of this year, usually a warning sign), are unable to judge the “scale of materiality or misstatement” so they require to do a lot more work before approving the accounts.

The story may be even more complex in that the directors have been told that these allegations may be related to an attempt to stop the major transaction announced on the 25th August. But it is in essence the same old story that we have seen at many AIM companies, particularly Chinese ones. Namely that the accounts are likely to be fictitious and the internal affairs of such companies are like the wild west, or now perhaps the wild east, where nobody can be trusted and the rule of law is barely in evidence.

The management of AIM at the LSE must surely make some tough decisions about allowing any more Chinese companies to list until they get to the bottom of these problems and can be assured that the moral climate and business practices in China are more like those in the West. ShareSoc has also made some suggestions about how to improve AIM which would have helped to avoid these kinds of difficulties – see www.sharesoc.org/campaigns/campaign-improve-aim-market/.

In the meantime, wise investors should simply avoid foreign companies that are listed on AIM, and particularly Chinese ones.

Roger Lawson

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