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December 8, 2012

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Home » Opinion » Press Notes

Stock market needs regulation, not promotion

AS Chinese stock indices plummeted to record low recently, there are clamors for government to step in to lift market sentiments. But the real urgency is to subject the market to better supervision.

Take the case of Wanfu Biotechnology Agricultural Development Co, which was listed in China's Nasdaq-style Growth Enterprises Market, and suspended in September from trading for fabrication and false statements.

It is reported that the Hunan-based company reported falsely 146 million yuan (US$23 million) in costs, 188 million yuan in earnings, and 40 million yuan in profits. It also hid the fact that its major production lines have stopped operation.

Existence of these companies could only further weaken confidence in Chinese stock market.

Investigation also found that Wanfu started fabricating last year, before it filed its IPO report.

By law, securities brokers should check the authenticity of the financial statements and status of a company applying for an IPO. So relevant accountants, lawyers and other professionals should be held legally accountable for the content of the report.

Apparently a strict procedure could have prevented Wanfu from going public. In view of the long term health of the stock market, the imperative today is to make the market better regulated.


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