Overseas fraud cases surrounding Chinese companies may further dampen S-chips sentiment

While accounting fraud cases among S-chip companies are not new to investors here, recent news published in Bloomberg and The Straits Times over the weekend, of high profile fraud (confirmed and speculation) cases among Chinese companies listed overseas can further dampen the already weak sentiment surrounding S-chip stocks.

In US, fraud at a Chinese financial software company called Longtop Financial Technologies was exposed by its auditors Deloitte Touche Tohmatsu after the latter learnt that Longtop did not have the cash it claimed and that there were 'significant bank borrowings' not reflected in the company's books. Last month, Deloitte had resigned as the auditor of another Chinese company, China MediaExpress, in part because of questions about bank confirmations. These incidents hint at the possibility of fraudulent activities beyond the companies concerned, to Chinese banks at least at the branch level, this according to The Straits Times.